Gas

Berry Petroleum ends cogen sales to utilities, seeks other customers


Paula Dittrick
OGJ Online

HOUSTON, Apr. 18, 2001 — Heavy oil producer Berry Petroleum Co., Taft, Calif., has shut its cogeneration plants and exercised its right to stop sales to Southern California Edison Co. and Pacific Gas & Electric Co. for nonpayment of $27.1 million in bills.

Jerry Hoffman, Berry CEO, said oil production is falling, while the cogen facilities are not making steam to keep oil production at customary levels. Meanwhile, Berry is seeking third-party electric customers.

“We have ceased steam injection at this point. Our oil production will continue to fall until we resume injecting steam,” Hoffman said in a speech Wednesday to the Independent Petroleum Association of America’s Oil & Gas Investment Symposium in New York City.

In February, Berry shut four of its five turbines and it shut the fifth turbine down this month, Hoffman said (OGJ Online, Mar. 30, 2001).

In a Securities and Exchange Commission document filed Monday, Berry said that as of Mar. 31, PG&E owed it $12.1 million and Edison owed $15 million for power deliveries dating as far back as November. Berry is seeking to collect those funds.

“Berry’s oil production has suffered primarily due to the reduction of steam injection into the company’s heavy oil reservoirs resulting from the breach (due to nonpayment) of the contracts by the utilities,” the SEC document said.

Berry was producing 17,000 b/d as of Dec. 31, but that had fallen to 15,000 b/d as of Mar. 31.

“The company estimates that production may decline another 20% within the next few months,” the SEC document said.

Hoffman said Berry has paid $13/Mcf in recent weeks for natural gas to fuel the turbines. He said operation of the cogen plants is critical to oil production and depends on the negotiation of electric sale arrangements to buyers other than the two California utilities.

Hoffman said Berry is seeking to broaden its portfolio of heavy oil properties with gas reserves and possibly with light oil reserves.

Earlier Wednesday Berry announced it paid $2.1 million for a 15.83% nonoperating interest in coalbed methane leases at South Joe Creek field in Wyoming. Berry estimates the proved reserves, net to its interest, to be 2.2 bcf.

Contact Paula Dittrick at [email protected]