[Pops]

Dvid Hughes, Drilling California: A Reality Check on the Monterey Shale
h/t Postcarbon & Resilience.org

$this->bbcode_second_pass_quote('', 'T')he recent growth in unconventional oil production from the Bakken (North Dakota), Eagle Ford (Texas) and other tight oil plays has drawn attention to the potential of shale in California’s Monterey Formation. Commercial oil production from the Monterey Formation is not new—more than a billion barrels of oil and four trillion cubic feet of gas have been produced from it since 1977, largely from conventional reservoirs. However, completion techniques like hydraulic fracturing which have made tight oil production possible from shale deposits elsewhere have not yet been widely implemented in the shale source rocks of the Monterey Formation.

In 2011, the U.S. Energy Information Administration (EIA) published a report by INTEK Inc. which stated that the Monterey Formation contains 15.4 billion barrels of technically recoverable tight oil (therein referred to as "shale oil") —64 percent of the entire estimated tight oil resource in the Lower-48 United States at that time. This estimate was seized upon by industry groups intent on the development of the Monterey shale, and was used as the basis of a March 2013 University of Southern California (USC) economic analysis which projected as much as a $24.6 billion per year increase in tax revenue and 2.8 million additional jobs by 2020. It also raised alarm among groups concerned about the environmental and public health implications of hydraulic fracturing, acidization, and other advanced well stimulation technologies.

This report provides the first publicly available empirical analysis of oil production data from the Monterey Formation, utilizing the Drillinginfo database (widely used by the oil and gas industry as well as the EIA). It lays out some of the fundamental characteristics of the Monterey compared to other tight oil plays, including geological properties, current production, and production potential. The results of this analysis will be useful for informing public policy decisions surrounding the development of the Monterey shale.

[rockdoc123]

Whereas Hughes is correct that one needs to be cautious about predicting outcomes from unconventional drilling in the Monterey Fm in California his analysis is wrong footed.

First he states:

$this->bbcode_second_pass_quote('', '1'),363 wells have been drilled in shale reservoirs of the Monterey Formation. Oil production from these wells peaked in 2002, and as of February 2013 only 557 wells were still in production. Most of these wells appear to be recovering migrated oil, not "tight oil" from or near source rock as is the case in the Bakken and Eagle Ford plays.

[TheAntiDoomer]

Good post rock, not a easy nut now, but neither was the bakken 10 years ago. I suspect in 10 more years we'll be talking crazy big production numbers out of cali.

[ROCKMAN]

Pops – An interesting report and worth getting into if one has the time and pays close attention. The most important aspect to be aware of to avoid confusion is that the MONTEREY FORMATION is not the MONTEFEY SHALE. The MF is the major rock unit that contains the MS as well as numerous other reservoir units including the many conventional oil fields. The Steven Sandstone is one of those reservoirs and is a conventional oil reservoir. It was deposited as a deep water submarine fan (turbidite) which is encased in the MS which was the source rock for those fields and many others. I did may master's thesis on one of the Stevens fields (Strand Oil Field) and learned a bit about the San Joaquin Basin. There’s a rather unique oil field on the eastern edge of the basin that produces from granite. The granite basement was uplifted, weathered producing some porosity and then submerged in the basin with the MS deposited on top of it thus providing the oil to fill an igneous rock reservoir.

So in reading reports about previous production from the MONTEREY FORMATION it should be kept clear they aren’t talking about the MONTEREY SHALE. How much oil will ever be produced from the MS is a big question mark IMHO. It matters not what they offer as “technically recoverable reserves” IMHO for the obvious reason that economics will determine how much is recovered. But I even have serious doubts about the TRR category numbers given how few tests of the MS have been conducted. For instance there is a well-defined “commercial oil window” in the Eagle Ford: get too shallow and production becomes very poor. Get too deep and it becomes primarily a NG play. Given the wide range of depths of the MS (ground level to 18,000’) obviously the sweet spots need to be identified. Beyond that some areas of the MS may be heavily fractured naturally while other areas have limited fracture system. A lot of wells will need to be drilled to work out this distribution pattern.

But the MS will be drilled…high oil prices assure it. I would guess that it will take 5+ years of significant drilling activity to get a handle on what the real potential of the MS might be.

[Islander]

$this->bbcode_second_pass_quote('', 'F')ederal 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.

[Subjectivist]

$this->bbcode_second_pass_quote('Islander', '')$this->bbcode_second_pass_quote('', 'F')ederal 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.

[Pops]

It made my belly sink to read that headline.

The Monterey was 2/3 of the shale reserves in the US and 1/3 of all crude reserves here, not a drop in the bucket.

[Newfie]

So, we have two data points, which one is right?

If the first estimate was that far off what makes us think the new estimate has any better precision?

My take on this is, they don't have a clue!

The more sinister take is we are being manipulated. But generally not being one to believe in conspiracy theories I trust to Ocams Razor, they are just incompetent.

So all we know is, we don't know.

[Beery1]

$this->bbcode_second_pass_quote('Newfie', 'B')ut generally not being one to believe in conspiracy theories I trust to Ocams [sic] Razor...

[Pops]

The first estimate was done by a private company consulting to the EIA in 2011.
The latest is the judgement of the EIA from facts on the ground -
basically that no one has been successful fracking oil from the monterey shale.

The majors have been saying this all along.

[Pops]

David Hughes at Post Carbon laid this out last December

$this->bbcode_second_pass_quote('', 'N')ew technology of high-volume, multi-stage hydraulic fracturing of horizontal wells, which has resulted in rapidly growing production from tight oil plays elsewhere in the U.S., has sparked hope of a resurgence of California oil production from the Monterey shale. It has been suggested in the 2011 EIA/INTEK report that the Monterey shale is the largest tight oil play in the U.S., with technically recoverable resources of 15.4 billion barrels, or 64 percent of Lower-48 U.S. tight oil potential. This widely-cited report assumed that broad regions, totalling 1,752 square miles, will prove productive and can be drilled at a density of 16 wells per square mile, with each well recovering 550,000 barrels of oil. The detailed analysis of geological and well production data in this report suggests this assessment is simplistic and likely highly overstated...

[Pops]

Here is the original report, page x of the summary show the table
http://www.eia.gov/analysis/studies/uss ... eplays.pdf

But the frontispiece shows the hard data:
$this->bbcode_second_pass_quote('', '[')b]Disclaimer

Neither the United States Government nor any agency thereof, nor any of their employees or contractors, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacture, or otherwise, does not constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof. The views and opinions expressed herein are not those of the United States Government or any agency thereof. The information in the technology profiles was provided by the host institutions; there has been no independent verification of any of this information. This work was completed under contract number DE-EI0000564 and task order number DE-DT0001772. Neither INTEK, Inc., nor the Department of Energy makes any representation as to the accuracy of the information.

[Pops]

If you want a "conspiracy" consider this:

$this->bbcode_second_pass_quote('', 'T')he White House is examining the longstanding U.S. ban on exports of crude oil, a senior official said, offering the Obama administration's most detailed statement yet of its thinking on the issue.

...
The Energy Information Administration, an independent research wing of the U.S. Department of Energy, has said it will examine the impact of U.S. crude oil exports on global markets.

[Pops]

A couple of quotes from here
$this->bbcode_second_pass_quote('', '
')Ohio Utica Shale
EIA downgrades California's Monterey shale by 96 percent
By BOB DOWNING Published: May 21, 2014
From Clean Water Action and Earthworks:

Statement of Clean Water Action California Director Miriam Gordon:

"The downgrade of production ability of the Monterey Shale really negates the Governor's claim that we need to develop Monterey Shale resources to transition California away from foreign oil. Now it's even more imperative for the state to press pause on the fracking button and support a moraotrium as proposed by SB 1132 (Mitchell), especially since fracking causes huge methane releases and uses significant quantities of freshwater. "

Statement of Earthworks Executive Director Jennifer Krill:

"We now know Governor Brown's promised shale oil economic bonanza isn't coming. The environmental risk of fracking remains, but without any possibility of California reaping an economic reward. Governor Brown should face facts, order a moratorium on fracking, and the legislature should pass SB1132."

[ROCKMAN]

Pops - "...basically that no one has been successful fracking oil from the Monterey Shale." Exactly. There are neither billions of bbls of RESERVES or even 600 million bbls of RESERVES in the Monterey Shale. But the formation does contain a huge amount of oil RESOURCE. Folks can debate that amount but IMHO that number is not relevant since it has no bearing on future production from those rocks. Get a couple of hundred rigs drilling the MS then we can start building a spreadsheet with MS RESERVES. Until then such reports are not just a waste of time but offers J6P a false sense of optimism.

[Pops]

Exactly ROCK, the hit to that false sense of optimism is the thing that made my stomach sink on the headline. Such a dramatic revision to the "headline" number is bound to have repercussions in the overall economy, not to mention investor confidence in shale everywhere, not just in CA.

That could feed into the "investment" problem we've been talking about lately.

[Pops]

I hope Admin has the site tuned up, our last high visit count was during the BP blowout 4 years ago, I'm thinking this will be a "good" day for traffic. lol

[westexas]

It seems to me that the EIA has reportedly reduced their recoverable US Shale Oil estimate by 60% or so.

A trip down memory lane . . .

Motley Fuel: Betting on the Monterey Shale (February, 2013)
http://beta.fool.com/insidermonkey/2013/02/06/betting-monterey-shale/23711/
(Meena is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.)

$this->bbcode_second_pass_quote('', 'O')il extraction by hydraulic fracturing, or “fracking,” has undoubtedly transformed the landscape of the American energy market (see The Definitive Guide to Fracking), put the United States on the fast track to energy independence, and thrust the names of shale formations such as the Marcellus, the Bakken, and Eagle Ford to the forefront of public consciousness. Soon, the sun-soaked, star-studded counties of Southern California may supplant the plains of North Dakota as the latest and greatest object of the shale energy land rush.

Recent headlines in shale energy involve the previously sparsely developed Monterey formation, which stretches in an arc along the coastal regions of southern California, including Kern, Orange, Santa Barbara, Ventura and Monterey Counties. A somewhat overlooked July report by the United States Energy Information Administration estimating readily recoverable shale oil and gas reserves in the country states that the Monterey formation boasts about 15.5 billion barrels of oil—nearly 64% of the total shale oil reserves in the United States. This quantity exceeds the total proved oil reserves of China or Brazil and is four times greater than the reserves of the Bakken shale formation.

[ROCKMAN]

Pops - It's similar to other stories on the site today. Just like the excitement that the increase in the GROWTH RATE in Chinese coal consumption has abated. That's good news but does change the fact that China is consuming almost 300% more coal today the it was just 10 years with no indication it will be reduced in the future. And stable oil prices thanks to the increase in US production. Yes instead: the world is spending a nice stable $2 TRILLION more per year then it was before the price surge.