California Resources Corporation has a proven track record of successful exploration and development using primary, waterflood and steamflood recovery methods.
Production of oil and natural gas requires energy to lift the fluids from the reservoir deep underground to the surface. The reservoir's natural pressure provides much of this energy but is eventually supplemented by artificial lift equipment. As oil and gas is produced, the reservoir’s natural pressure is reduced. The reservoir can be re-pressurized by injecting water or gas to mobilize and displace additional oil and gas into production wells. Even after applying these improved oil recovery (IOR) techniques, a large quantity of oil and gas may remain in the reservoir. Enhanced oil recovery (EOR) techniques such as injection of steam or carbon dioxide can allow more of the oil in the reservoir to flow into production wells. By producing oil and natural gas with IOR and EOR techniques, we extend the lives of mature fields and maximize the efficient use of existing infrastructure and land surface.
We determine the development method to use based on reservoir characteristics, reserves potential and expected returns. We seek to optimize the potential of our assets by progressively using primary recovery methods, which may include well stimulation and artificial lift techniques, IOR methods such as waterflooding and EOR methods like steamflooding, using both vertical and horizontal drilling. All of these techniques are proven technologies we have used extensively in California for many decades.
Primary recovery methods are the first techniques we use to develop a reservoir. These methods consist of drilling and producing wells without supplementing the natural energy of the reservoir. Our successful exploration program continues to provide us with primary recovery opportunities in new reservoirs or through extensions of existing fields.
Some of our fields no longer have sufficient energy to drive oil to our producing wellbores. Waterflooding is a well understood process that has been used in California for over 50 years to re-introduce energy to the reservoir through water injection and to sweep oil to producing wellbores. This process has been known to increase recovery factors by approximately double those experienced under primary recovery methods. Our waterflood operations have attractive margins and returns in the current price environment. These operations typically have low and predictable production declines and allow us to extend the productive life of a reservoir and significantly increase our incremental recovery after primary depletion. We use waterfloods extensively in the San Joaquin, Los Angeles and Ventura basins where they reduce production decline by recovering reserves that could not be accessed through primary production.
Some of our fields contain heavy, thick oil. Steamfloods work by injecting steam into the reservoir to heat the oil, decreasing its viscosity, or thinning the oil, allowing it to flow more easily to the producing wellbores. Steamflooding is a well understood process that has been used in California since the early 1960s. This process has been known to increase recovery factors from approximately 10 percent under primary recovery methods to up to approximately 75 percent. Thermal operations are most effective in shallow reservoirs containing heavy, viscous oil. The steamflood process is generally characterized by low capital investment with attractive margins and returns even in a low price environment as long as the oil-to-gas price ratio is in excess of five. The economics of steamflooding are largely a function of the ratio between oil and natural gas prices. After drilling, these operations typically ramp up production over one to two years as the steam continues to influence the oil production, and then exhibit a plateau for several months, with a subsequent low, predictable oil production decline rate of 5 to 10 percent per year. This gradual decline allows us to extend the productive life of a reservoir and significantly increase our incremental recovery after primary depletion. We use steamfloods extensively in the San Joaquin Basin, where they have allowed us to grow our production from mature fields such as Kern Front and Lost Hills, among others.