US officials cut estimate of recoverable Monterey Shale oil by 96%

Sahagun, L. May 21, 2014. Los Angeles Times.

Federal energy authorities have slashed by 96% the estimated amount of recoverable oil buried in California’s vast Monterey Shale deposits, deflating its potential as a national “black gold mine” of petroleum.

Just 600 million barrels of oil can be extracted with existing technology, far below the 13.7 billion barrels once thought recoverable from the jumbled layers of subterranean rock spread across much of Central California, the U.S. Energy Information Administration said.

The new estimate, expected to be released publicly next month, is a blow to the nation’s oil future and to projections that an oil boom would bring as many as 2.8 million new jobs to California and boost tax revenue by $24.6 billion annually.

The Monterey Shale formation contains about two-thirds of the nation’s shale oil reserves. It had been seen as an enormous bonanza, reducing the nation’s need for foreign oil imports through the use of the latest in extraction techniques, including acid treatments, horizontal drilling and fracking.

The energy agency said the earlier estimate of recoverable oil, issued in 2011 by an independent firm under contract with the government, broadly assumed that deposits in the Monterey Shale formation were as easily recoverable as those found in shale formations elsewhere.

Major oil companies have expressed doubts for years about recovering much of the oil.

The problem lies with the geology of the Monterey Shale. Unlike heavily fracked shale deposits in North Dakota and Texas, which are relatively even and layered like a cake, Monterey Shale has been folded and shattered by seismic activity, with the oil found at deeper strata.

Geologists have long known that the rich deposits existed but they were not thought recoverable until the price of oil rose and the industry developed acidization, which eats away rocks, and fracking, the process of injecting millions of gallons of water laced with sand and chemicals deep underground to crack shale formations.

The new analysis from the Energy Information Administration was based, in part, on a review of the output from wells where the new techniques were used.

“From the information we’ve been able to gather, we’ve not seen evidence that oil extraction in this area is very productive using techniques like fracking,” said John Staub, a petroleum exploration and production analyst who led the energy agency’s research.

“Our oil production estimates combined with a dearth of knowledge about geological differences among the oil fields led to erroneous predictions and estimates,” Staub said.

Sep 22, 2013. Oil Firms Seek to Unlock Big California Field Geology is a challenge in the Monterey Shale. Wall Street Journal.

California’s Monterey Shale formation is estimated to hold as much as two-thirds of the recoverable onshore shale-oil reserves in the U.S.’s lower 48 states, but there’s a catch: It is proving very hard to get.

Formed by upheaval of the earth, the Monterey holds an estimated 15.4 billion barrels of recoverable shale oil, or as much as five times the amount in North Dakota’s booming Bakken Field, according to 2011 estimates by the Department of Energy.

The problem is, the same forces that helped stockpile the oil have tucked it into layers of rock seemingly as impenetrable as another limiting factor: California’s famously rigid regulatory climate.

Fracking is more difficult to do in the Monterey because the formation is so jumbled, says Amy Myers Jaffe, executive director of energy and sustainability at the University of California, Davis. That makes it hard to find large amounts of shale to frack, industry officials say.  “The technical challenges are such that it makes it more expensive to frack in California,” Ms. Jaffe says.

So far, there have been no production breakthroughs.

Chris Martenson:  The summary here is no surprise to me. Whereas the Bakken is a big, flat expanse, unsullied by geological forces over time, the Monterey is in seismically active California and has been stressed and bent and folded and heaved over millions and millions of years. When you are trying to frack oil and gas out of the earth, every fault works against you by bleeding your pressure away. Worse, some fractures connect to other features, complicating the practice of keeping fracking fluids away from water tables. So, for now, the best we can do is place the Monterey on the “maybe” list. But note that it’s certainly no slam-dunk, simple-as-plumbing operation like the earlier storied shale plays.

Andrews, Steve. 29 July 2013. Interview with Martin Payne—Is Peak Oil Dead? ASPO-USA Peak Oil Review.

Steve Andrews: I’ve heard that the Monterey field in California seems to be the one that’s the least ready to give up its very large oil-in-place resource. Do you read it that way?

Martin Payne: The Monterey gets brought up all the time because it has a huge in-the-ground number. It’s another question mark. There’s a good chance the clay content may be the issue. It gets back to the fact that to work, the rock in an unconventional play needs to break like a piece of glass; it needs to be that brittle to work really well. The presence of ductile clay in high percentages prevents that from happening. So with a high clay content you can’t create the necessary spiderweb network of fractures and microfractures to provide exit routes for the oil.

I liken it to a highway system: dirt roads feeding county roads, feeding state highways, feeding interstates that eventually go into 12-lane freeways when you get to downtown…where downtown is the wellbore. You can’t create that underground highway network unless the rock breaks well. I’m pretty sure that’s the problem with the Monterey.

The Conasauga is a quickly forgotten example of a shale gas play that didn’t live up to expectations. There were thousands of feet of low TOC rock, but the bottom line was that due to clay content there wasn’t a way to fracture and keep the rock sufficiently open in order to make the play economic. So even though the numbers were huge on an in-place basis—just like the Monterey, but in gas instead of oil—you couldn’t create the highway system, so it wouldn’t work.