The future of California's oil supply

Once an oil exporter, California now depends on imports for more than 60% of its oil supply. This paper examines the oil production outlook for each of California's major oil sources, including California itself. Oil production trends, published geological and engineering reports, and proposed developments in California's supply area are reviewed to define supply trends, especially for the medium-to-heavy, sour crudes that are processed in California's refineries. Refinery upgrading capacity is already highly developed in California, thus it is assumed that a competitive advantage in heavy, sour crudes will continue, although refining heavy oil releases more carbon dioxide. About a quarter of California's imports are from Alaska, the rest from foreign sources including Saudi Arabia, Ecuador and Iraq. Before foreign sources became so important, California's refining industry processed California's own crudes and Alaska's North Slope crude. Like those crudes, oil from northern Saudi Arabia, southeast Iraq, and Ecuador is also sour and medium to heavy, ranging from 16 to 35° API and from 2 to more than 3% sulfur by weight. By far the most important sour crude development in California's supply area is Saudi Arabia's 900,000 BOPD Manifa project, originally slated for completion in 2011 but now facing delays. Manifa contains oil that ranges from 26 to 31° API and from 2.8 to 3.7% sulfur. Over the longer term, Alaska will continue to play an important supply role if the Chuckchi and Beaufort Seas live up to expectations. Middle East production is not increasing, yet oil cargoes from the Middle East have to pass growing Asian markets to reach California. Alaska and Mexico also supply oil to the Pacific Basin, but are facing production declines. The effect of rising Asian demand on Pacific Basin oil markets is already visible, with significant amounts of oil coming to California from Atlantic Basin sources such as Angola, Brazil, and Argentina. The US West Coast pipeline system is separate from the integrated East Coast, Gulf Coast and Midwest system, so energy security issues for the West Coast may differ from those of the country as a whole. There are policy options that could affect California's oil supply security, including increased oil development in Alaska or offshore California, development of additional oil pipeline outlets on Canada's Pacific Coast or substituting natural gas for oil if possible. All of these policy options are currently the subject of political debate.