Wealth for a Riviera

California, that land of anomalies, imports 36% of its crude oil while the continent's largest proven reservoir of untapped oil sits untouched under the harbor and waterfront of Long Beach. The size of this pool--1.2 billion bbl.--has been certain for four years, but Long Beach ordinances forbade drilling inside the city and the city fathers disagreed with the state over the division of royalties. Finally, last fall, the drilling laws were relaxed and a split finally agreed on: 85% for California, 15% for Long Beach.

Last week oilmen jammed into the Long Beach city council chambers to bid for the right to tap the pool. So desperate are West Coast oil companies for local crude that the bids, which were expected to offer 90% of net profits as royalty, averaged out to 96.25% on the six sections of the field. Over the next 35 years Long Beach and California will slice up $1.4 billion.

The largest contract, for 80% of the field, went to a syndicate made up of Humble, Shell, Mobil, Texaco and Union Oil, which will pay a 95.56% royalty. Pauley Petroleum got 10% with a bid of 98.277%, and Richfield and Standard of California together scooped off the remaining 10%, including one sector on which they will turn back an unprecedented 100%. The oil companies, which normally pay royalties that range around 50% on the crude that they pump from the ground, will make the money to offset the high royalty payments through profits on the sale of refined products. They will also retrieve development costs before paying the royalties and, since many of their refineries are practically within sight of the field, save on transportation.

Before drilling begins in midsummer, the companies must also negotiate with 10,000 Long Beach property owners, who will share another $120 million on the sale of their property. Long Beach, for its part, will use the money to achieve its dream of becoming "The Riviera of the West." Drilling equipment, under the contracts, must be buried under the surface of four man-made islands in the harbor, and pipelines must be concealed. Under state law, the city must use its royalties to improve a six-mile beachfront on which high-rise luxury apartments, marinas and a convention hall are already built. With oil wealth rolling in, the western Riviera will not even need a gambling casino to ensure its prosperity.

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