Why California Just Reversed Course on Oil (And How Petcoke is Changing the Game)

Links

• Subscribe to Local Energy on YouTube
• California SB 237
• California SB 767
• Follow Robert Clarke on Twitter

Show Notes

1. California's Energy Policy U-Turn: How Senate Bills 237 & 767 could restart drilling in Taft and Bakersfield, plus the political calculations behind Newsom's shift
2. Petcoke Technology Breakthrough: Why this sand alternative is reaching micro-fractures that traditional proppants can't access, boosting production significantly
3. $717 Million Acquisition News: California Resources Corporation's purchase of Berrycorp and what it signals about industry confidence
4. Technical Deep Dive: Understanding KREVs, mud motors, and the hydraulic forces that actually spin drill bits thousands of feet underground
5. Industry Insider Knowledge: From oil field superstitions to abbreviation shortcuts, the unwritten rules that govern daily operations

Transcript

Peter Brecht: Hey everyone, this is Local Energy. My name is Peter Brecht, and I'm here with Wade Spear. Excited to have you guys with us. Wade, we started putting this on Spotify like two weeks ago, and that's really where it's at - everyone's listening to us on Spotify. I think it's because they don't have to look at us!

Wade: Right! We've got a face for radio and a voice for the papers, as they used to say.

Peter: Exactly! So we're on Spotify - I think that's probably the best place to find us, even though YouTube is still climbing. We're starting to find our groove here.

Big Announcement - Our First Sponsor!

Peter: Huge announcement - we have a sponsor! My father-in-law is sponsoring our show. He's paying $40 a month for our Riverside subscription that we're using to record. He's 75 years old, traveling to Canada in a van with his dog Ozzy, living his best life. He even put together this fun infomercial for compressed towels - I'm going to put it at the end of this episode.

Wade: What's a compressed towel? Like a vacuum-packed towel?

Peter: It's purely my father-in-law being himself, living his best life on the road. Makes me jealous - here we are in front of cameras while he's bathing in streams in backwoods Canada!

California Energy News

Peter: I wanted to cover some news items. In California, they passed Senate Bill 237 and 767, which are sitting on our governor's desk right now. SB 237 is basically opening up Kern County to permitting - up there in Taft and Bakersfield - hopefully getting some drilling permits approved, which would be fantastic.

Wade: What do you think's driving that? That seems like a change of course.

Peter: Definitely positioning for Newsom to run for president. I think we've done a good job as an industry in California getting out there and talking about it. When your livelihood is on the line, you're going to speak up. When I went to the SIPA event a couple months back, the room had a different aura - there was a sense of hope, like we're getting somewhere.

If you run for president and have energy failure, you're going to have problems with all the states dependent on oil and gas for their economy. Along with that, they've got the Valero refinery that they're throwing money at to keep online, which is another reversal.

SB 767 has the energy commissioner monitoring crude oil pipeline deliveries to prevent refinery disruptions. What happens is we're going to have gasoline price increases if they don't fix this, and people get mad about gas prices more than anything else.

Wade: That's the direct one - you see it every day.

Peter: I'm going up to Bakersfield on Tuesday to see what the temperature is like up there. I'm hoping it'll be more positive. I'd be so excited if gas could just stay flat or maybe even go down.

Petroleum Coke (Pet Coke) Development

Wade: You asked about pet coke last week, and I'm starting to see a lot of that hit my feed. Robert Clark or somebody I follow on Twitter was posting about it - seems like he was going on a road show telling everybody about it.

It's really interesting - they're seeing 7-18% increase in production. The thought is it's super cheap, a little bit lighter so easier to transport, and it gets into fractures that maybe sand couldn't prop open. If it can get out there and prop open those fractures and keep those highways flowing where sand maybe can't reach, that would be really interesting.

They're not replacing sand with pet coke - they're adding pet coke with the sand. I think they're using it more in the very small micro fractures at the very end, and maybe not as much in the fractures right next to the wellbore.

Peter: So the fractures closer to the heel are bigger than the ones as you go to the end?

Wade: Closer to the wellbore. Every fracture propagates out essentially perpendicular to the wellbore. The fracture starts from inside the casing where your perforations are, then grows out from there. The fractures get smaller as you get further away, plus you have fractures breaking off these bigger fractures, creating an entire fracture network.

You don't just have big by-wing fractures - those aren't always best for production because a molecule of gas or oil would have to travel a long distance to get to that big fracture. With all these little fractures, it can enter one of those network fractures, transfer to the primary fracture, and go from there. That's where pet coke really comes in - it props open those really small fractures that sand can't get to.

California Resources Corporation Acquisition

Peter: Another thing I saw that Robert Clark posted about - CRC (California Resources) bought Berrycorp for $717 million. They're going to be headquartered in Long Beach, which is great. They're estimating 161 barrels a day production with 652 million barrels of proven reserves. For that to come on the heels of all this new legislation - the timing is perfect, almost like they planned it.

Wade: Feels like the tide's turning in California energy.

Peter: I'd love to get someone from CRC on here to talk to one of these California guys. Maybe we'll go to the museum on Tuesday - I'm taking one of our new guys up there who's never been on an oil field before. I've got to show him a pump jack in real life.

Technical Deep Dive: Understanding Drilling Terms

Peter: Let's talk about some technical terms. You mentioned "good TF and good ROP when sliding, but that KREV limit could be a problem on those slower curves." What is a KREV limit?

Wade: TF stands for tool face - good tool face control, being able to control where you want to go. ROP is rate of penetration - how fast you're drilling. KREVS stands for a thousand revolutions.

Bits that have roller cones - like Chimera bits made by Baker Hughes - those bearings have guidelines. They say here's how many KREVs you should run based on the bit size. You can run as many as you want, but beyond a certain number of KREVs, they've seen increased failures.

You track KREVs - thousands of revolutions that bit has turned while on that run. This helps determine when to pull that bit and get a fresh one.

Peter: So you can modify how fast the drill bit's turning to increase or decrease your KREVs?

Wade: Yes, two different methods. One is your rotary on surface - but if you're sliding, you're not turning your top drive, so that doesn't add revolutions. Downhole, your motor spins your bit. You can change motor speed by ordering a different motor or adjust what you've got by altering flow rate.

For example, with a 78/67 motor - that's 8 lobes, 67 stages - the RPG (revolutions per gallon) is about 0.66 or 0.67. Every gallon of fluid that passes through it, the bit spins 0.67 revolutions. If you're pumping at 300 GPM, the motor is turning the bit 200 RPM.

Peter: What exactly is a motor? Is it electric?

Wade: It's a mud motor. I showed you the stator - there's a rotor that goes inside. If the stator has 8 lobes, the rotor has 7 lobes. There's always one lobe empty. As fluid is pumped down the drill string, it hits the rotor. Because the rotor has a helical turn, some fluid pushes down but some pushes sideways, creating a hydraulic force that spins the rotor inside the stator, which then spins the bit.

Peter: That connects so many dots! What is sliding?

Wade: Sliding is when you're not rotating the drill string using the top drive. You're trying to orient your bent motor in a single direction. The opposite is rotating, when we're turning the whole string.

Industry Abbreviations and Job Descriptions

Peter: Someone commented that this is an entire job description with just abbreviations: TIH, DO, CP, tag PBTD, TOOH, RDMO. Let's walk through it.

Wade: TIH - trip in hole. DO - drill out. I'm not sure on CP - could be circulate and pull? PBTD might be probable bottom hole TD. TOOH - trip out of hole. RDMO - rig down, move off.

Peter: I love that you can condense an entire job into abbreviations that the industry understands. It saves time when you're hunt-and-pecking on reports.

Oil Field Superstitions

Peter: We got three more superstitions this week:

Never bring drill bits to the floor upside down - What's right side up?

Wade: Drill bits come in bit boxes. When you open a bit box, you're looking at the threads, not the face of the bit. The face should be facing down when you want to screw it on. If you stand them up to look at the face, they're pretty top-heavy and can fall over.

Position drill pipe with the pin facing the rig floor

Wade: Actually, you want the box end facing the rig floor. You pick it up from the box end, drag it up the V-door, set it in your mouse hole. When making up stands, you have the box looking up and pick up the next piece pin down to stab and make up.

Don't make after-work plans when heading to the pad - Make plans and you're guaranteed not to make it!

Wade: I could see that, though most rig crews work 12-hour limits for safety reasons. For consultants though, yeah, it can definitely drag on.

Peter: That's all we have for you today. Thanks for hanging out with Wade and me. If you have questions, reach us at peter@localenergy.com. We love your questions - have a great afternoon!

Wade: Thanks everybody!