Kai Ryssdal: Crude oil closed today in New York at $103 and a nickel, up just a hair. Monday it'll be, well I don't know, whatever the market says it's gonna be. There's nothing actually about oil that's a sure thing. Least of all: finding it. Companies spend hundreds of millions of dollars leasing land and drilling wells based on what's basically some very educated guesswork. The biggies, BP and Chevron and Exxon, go drilling all over the world.
But there are hundreds of smaller companies poking around right here in the United States looking for the next big find. Alex Chadwick, host of the public radio series Burn: An Energy Journal, has the story of one of 'em.
Alex Chadwick: I'm following Sid Jansma, Jr., across the steel-grid deck of Patterson oil derrick No. 176.
Sid Jansma: What we'll do is we'll walk up these steps so you can see the drilling floor.
Sid has been leasing the rig for three years. Or rather his company has, Wolverine Gas and Oil. This well is Covenant 20-5, 14,000 feet deep. It cost Wolverine $21,350,513 and change. That's a lot of numbers, but they matter -- the oil business is all data and some luck; more of both is always better. You see the product of all this about a half-mile farther along Utah Rte. 24, where Sid shows me a modest arrangement of pipes emerging from the ground in a small area closed off by chest-high, chain-link fence.
Jansma: This discovery well was drilled and actually discovered oil in Dec. 12, 2003. I will never forget that.
This well is Covenant 17-1, and no, he won't forget it. Utah has a lot of gas and oil, and for about 40 years mineral rights around Richfield were leased by a couple of the bigs -- Chevron and Phillips. They drilled five wells decades ago. One cost $17 million, a lot of money for the early '70s. They got nothing and after a while they quit looking. Chevron kept the leases though -- oil companies do that. A generation passed. And then, about a dozen years ago, maybe in a fit of clearing the books, Chevron decided to unload Richfield. And someone from the company called Sid Jansma.
Jansma: Well, I got the call from Chevron because I was working 30 miles north of here on another project and they were just wanting to find somebody to write a check out for their acreage. I told them I had enough acreage. I had 40,000 acres of my own, why would I buy their 80,000? But I'm curious.
It happened that Wolverine's exploration manager once worked for Chevron, and he knew this area of Utah. He already knew some of the features. Leases are priced per acre; this was was 80,000 acres, and Chevron was asking for $2 -- $160,000 total.
Jansma: So I bought the acreage from Chevron and then we did a whole lot of studies for two years and figured that we wanted to drill right here and that's when we drilled the well.
Chadwick: Right here in this spot?
Jansma: Right here in this spot.
Chadwick: How big a company are you in the oil business?
Jansma: My company, Wolverine, is very small. We have a total of 45 employees all over the United States. That's it. However, what's interesting for people to know is companies like myself own 85 percent of all of the oil and gas wells in the United States and we produce over 50 percent of all of the oil and gas in continental United States.
The site where Sid had been drilling, 30 miles away, that wasn't for oil, it was something called coal methane, a kind of gas. Wolverine geoscientists looked at the Richfield data, and they made a highly educated guess.
Jansma: We thought there was a high probability that there was gas in it, not oil.
Chadwick: When you say high probability, you're an oilman, what does high probability mean? 10 percent? 20 percent?
Jansma: Oh, thanks for asking that. Yeah, a high probability means it had about a 5 percent to 10 percent probability that there was oil, and probably 5 percent.
I'm leaving out some really big parts -- like the financing, Sid trying to get partners to buy in because nobody wants to go into this alone. Spread the risk. He got tuned down 64 times. But finally, he's got partners, and it's December 2003.
Jansma: Mind you, the well starts out at zero and then goes 1 foot, 2 foot, 5,000 and so forth. As we were drilling at 5,838 feet, we started getting shows of oil.
Data. A "show" of oil is a tiny hydrocarbon signal in the deep earth the drill brings up. They are too small to see, but the engineers test everything, and the instruments can read it.
Jansma: So we decided finally, at about 6,400 feet, just to tell them to quit drilling and go in and run electric logs in the holes, a special electric tool that tells you what's in the rock. When we run this special electric tool in, it was, "Wow! There's a lot of oil in that rock." As a matter of fact, there's a whole lot of oil in that rock.
It was not the gas that they had hoped for. It was a very high grade of crude oil, about 100 million barrels of it.
Jansma: So we were stuck with having an oil discovery at 5,800 feet that actually was the largest oil discovery in the United States onshore in 30 years.
Wolverine has spent the past decade drilling another 14 wells in the search for another find. Thirteen were dry. That's the oil business. But in the quiet, graceful hills outside Richfield, Utah, those 100 million barrels of oil Wolverine found... well, don't bother. I'll do the math: at $100 each, it's worth $10 billion. And that's the oil business.
And about one month ago now, Wolverine decided to start giving up some of the leases it's been holding in the Richfield area. It'll keep the Covenant Field, of course, but probably stop exploring for more. "Someone else can get a try," Sid told me, and when I asked if he really thinks someone else will come in, even with Wolverine getting out, Sid replies with complete certainty: "Oh, yeah, they will." And that is the oil business, too.
I'm Alex Chadwick for Marketplace.