Oil firms tapping into old wells in quest for last drop of crude

Guest rooms overlooking the ocean in Huntington Beach, Calif., also are overlooking working oil pumps. Rig operator Robert Gibson, right, lowers a hook as Mike Simmons waits to attach it to a drill rod from an oil well in Signal Hill, once nicknamed Porcupine Hill, in California.

SIGNAL HILL, Calif. - The oil rig rumbles to life, breaking the early morning quiet in this neighborhood of urban townhouses and big-box stores with a deafening screech and roar.

As commuters idle at a nearby stoplight, a drilling crew scrambles to repair and expand one of the dozens of aging oil wells that dot the landscape of this small, hillside city about 30 miles south of Los Angeles.

With oil prices above $110 a barrel, producers nationwide are taking a second look at decades-old wells that were considered tapped out and unprofitable when oil sold for one-fifth the price or less.

Independent producers and major conglomerates are reinvesting millions in these mature wells, using new technology and drilling techniques to eke every last drop out of fields long past their prime and often in the middle of suburbia.

In this instance, Terra Exploration & Production Co. believes that up to 2 billion barrels of oil are under Signal Hill, once nicknamed "Porcupine Hill" for its crown of oil derricks, before developers planted gated communities and strip malls.

"A lot of these wells have been sitting idle for many years," said Mick Conner, who hopes to increase daily production on his half-dozen wells. "If we can take a 10-barrel well and make it a 20-barrel well, it becomes very profitable for us."

In California, some of the least profitable and old wells - so-called "stripper" wells - are clustered in a dense urban environment, tucked between malls, gas stations, and homes. They are the legacy of a turn-of-the-century oil boom that faded with the discovery of oil in Texas and the depletion of the easiest reserves.

But some homeowners are protesting the move to boost production on these aging oil fields. Many do not own the mineral rights under their land or moved in long after the original well was built.

John Young, who lives near 40-year-old wells in Whittier Hills, was furious when he learned a small oil company was in talks to drill new wells near his neighborhood. An explosion at an existing well several years ago killed a man, sent flames 150 feet into the air, and ignited a brush fire, he said.

"I'm personally astounded they're even considering this," he said. "It is loud, it is noisy, and it stinks."

In recent years, the state's oil production has dropped by about 5 percent a year as the easy oil dried up, said Hal Bopp, California's oil and gas supervisor. But with producers revisiting these sites, he said, the state's production increased by 2 1/2 million barrels in 2007 for the first time in years. Between 50 and 100 "orphan wells" have been brought back online.

The boom has strained the U.S. industry, and a shortage of working oil rigs means firms that don't own their equipment can wait six months to secure a rig and crew. They can expect to pay up to $1 million to rent the rig and hundreds of dollars a day for the work.