There's no rush to drill in California

Even as oil prices soar, state's aging fields and market volatility make companies hesitant.

- BLANCA BEGERT

DAVID MCNEW Getty Images OIL RIGS just south of Taft, Calif., extract crude in in 2008. The state's oil fields are becoming depleted.

If you are an oil producer with wells in California and global oil prices have risen to over $100 a barrel in the last week, are you going to drill new wells?

It’s a question that touches the lives of hundreds of thousands of Californians who either live near oil wells or receive royalty checks as mineral rights owners.

Experts said probably not, given this state’s aging fields and the unpredictability of global prices.

It’s too early for data that will show whether companies have ordered more drilling rigs on their fields — known as the rig count — since the U.S. and Israel attacked Iran and sent oil prices soaring. But analysts and producers say only if prices stay above $80 for at least a year do they expect an increase in drilling.

“Nobody expects today’s high prices to last and we could very likely get back to the low $60 [per barrel] environment we faced just a few weeks ago,” said Rock Zierman, chief executive of the California Independent Petroleum Assn. trade group.

Experts say the unique geology of California’s fields, and the nature of its heavy crude, make new projects, and efforts to pump more oil out of existing ones, costlier and more energy-intensive than drilling in other parts of the country.

In the Permian basin of New Mexico and west Texas, for example, producers can more quickly and economically ramp up extraction of light crude oil trapped in shale rock.

But even there, "operators are wary of adjusting plans to spend more drilling capital if prices come back down after the conflict ends, which is currently suggested by the oil price curve," said Matthew Bernstein, vice president of North America oil and gas at the consulting firm Rystad Energy.