By Sean Belk - Staff Writer

June 19, 2012 – The California State Lands Commission, at its June 7 meeting, approved a long-awaited deal to incentivize increased oil production in the West Wilmington Oil Field in the Long Beach harbor.

The contract provides financial incentives to Los Angeles-based Occidental Petroleum (Oxy) through an oil revenue sharing agreement – if the oil company discovers new oil in existing reserves through new technology. The state commission approved the new contract in a 2-1 vote. California State Controller John Chiang cast the dissenting vote, stating he felt there could have been a better deal worked out.

Oxy plans to invest $50 million in new development in the first two years, however, production will be contingent on whether the oil market remains profitable and the price of oil exceeds an average of $65 a barrel for a six-month period, according to a state staff report. The California Division of Oil, Gas and Geothermal Resources would have to approve issuing any drilling permits.

Since 2006, Oxy has been in negotiations with the state and with the City of Long Beach on the incentivized oil-drilling program to spur tapping existing wells in the West Wilmington Oil Field in the Port of Long Beach and to initiate water flood injection to draw out more oil.

The new contract would allow for incremental revenues to be split, with Oxy receiving 49 percent, the state receiving 49 percent and the city receiving 2 percent. The new revenue won’t be realized until about three to five years. Under the new contract, the state is estimating to net roughly $100 million in additional oil revenue over the next two decades. Long Beach city officials project an income of an additional $6.6 million in revenue during that period.