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Page added on May 21, 2014
US officials cut estimate of recoverable Monterey Shale oil by 96%
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.
The estimate touched off a speculation boom among oil companies. The new findings seem certain to dampen that enthusiasm.
Kern County in particular has seen a flurry of oil activity since 2011, with most of the test wells drilled by independent exploratory companies. Major oil companies have expressed doubts for years about recovering much of the oil.
The problem lies with the geology of the Monterey Shale, a 1,750-mile formation running down the center of California roughly from Sacramento to the Los Angeles basin and including some coastal regions.
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.
Compared with oil production from the Bakken Shale in North Dakota and the Eagle Ford Shale in Texas, “the Monterey formation is stagnant,” Staub said. He added that the potential for recovering the oil could rise if new technology is developed.
A spokesman for the oil industry expressed optimism that new techniques will eventually open up the Monterey formation.
“We have a lot of confidence in the intelligence and skill of our engineers and geologists to find ways to adapt,” said Tupper Hull, spokesman for the Western States Petroleum Assn. “As the technologies change, the production rates could also change dramatically.”
Rock Zierman, chief executive of the trade group California Independent Petroleum Assn., which represents many independent exploration companies, also sounded hopeful.
“The smart money is still investing in California oil and gas,” Zierman said.
“The oil is there,” Zierman said. “But this is a tough business.”
Environmental organizations welcomed the news as a turning point in what had been a rush to frack for oil in the Monterey formation.
“The narrative of fracking in the Monterey Shale as necessary for energy independence just had a big hole blown in it,” said Seth B. Shonkoff, executive director of the nonprofit Physicians Scientists & Engineers for Healthy Energy.
J. David Hughes, a geoscientist and spokesman for the nonprofit Post Carbon Institute, said the Monterey formation “was always mythical mother lode puffed up by the oil industry — it never existed.”
Hughes wrote in a report last year that “California should consider its economic and energy future in the absence of an oil production boom from the Monterey Shale.”
The 2011 estimate was done by the Virginia engineering firm Intek Inc.
Christopher Dean, senior associate at Intek, said Tuesday that the firm’s work “was very broad, giving the federal government its first shot at an estimate of recoverable oil in the Monterey Shale. They got more data over time and refined the estimate.”
For California, the analysis throws cold water on economic projections built upon Intek’s projections.
In 2013, a USC analysis, funded in part by the Western States Petroleum Assn., predicted that the Monterey Shale formation could, by 2020, boost California’s gross domestic product by 14%, add $24.6 billion per year in tax revenue and generate 2.8 million new jobs.
29 Comments on "US officials cut estimate of recoverable Monterey Shale oil by 96%"
TIKIMAN on Wed, 21st May 2014 5:55 am
600 million?
There will be 0 investment for that project.
westexas on Wed, 21st May 2014 6:36 am
I am reminded of an interview with Gary Taubes:
http://www.epimonitor.net/Interview_Taubes.htm
Epi Monitor: What is the definition of pathological science?
Taubes: This is a term coined by Irving Langmuir, a Nobel prize winning chemist. Langmuir described pathological science as “the science of things that aren’t so,” and further stated that “these are cases where there’s no dishonesty involved, but where people are tricked into false results by a lack of understanding about what human beings can do to themselves in the way of being led astray by subjective effects, wishful thinking, or threshold interactions.”
westexas on Wed, 21st May 2014 6:41 am
Obviously, there are commercial shale oil plays, but I suspect that they will be the exceptions. And even where we see commercial oil production in the US, e.g., the Bakken Play, the average oil production rate in 2013 was a little over 100 bpd, while the median rate was less than 100 bpd, while overall production is still on an upslope.
I have a hard time believing that production rates like this, especially given very high decline rates, will work in much higher operating cost areas around the world–especially where effective royalties are much higher than in the US.
Pops on Wed, 21st May 2014 7:12 am
David Hughes laid this all out last year, shouldn’t be a surprise to anyone who reads more than press releases.
http://montereyoil.org/the-report/
Pops on Wed, 21st May 2014 7:51 am
This is a big deal, the Monterey was 2/3 of US shale “reserves” and 1/3 of all US crude “reserves” as reported by the EIA.
My WAG is the EIA got their courage up in light of the POTUS tlking about lifting the oil export ban.
Here is the forum thread:
http://peakoil.com/forums/post1193954.html#p1193954
oilystuff on Wed, 21st May 2014 8:25 am
This is a really big deal!
Mr. Brown, how long before the same discount occurs in the very hyped-up Cline in your part of the world?
Things have been less than stellar there, also.
bobinget on Wed, 21st May 2014 8:45 am
I, for one, do not find this cheerful news.
Events are turning towards an (involuntary) IMPORT
ban.
Let’s see how well we fare.
As I’ve said, a dozen times here and elsewhere,
China will soon require every liter of planetary oil exported .
Contentious oil battles moved to Asia
last year.
INDIA’S population and FF REQUIREMENTS will exceed that of CHINA’S in fewer than five years.
India, Vietnam, Philippines, Japan, Korea, vs China for t scarcer resources. All soon to be headline news.
It appears mankind can’t wait for Global Warming to make life on earth uncomfortable to uninhabitable.
westexas on Wed, 21st May 2014 8:50 am
The last I heard, many operators were referring to the Cline as the De-Cline Shale Play.
However, I think that the Wolfberry Play (Wolfcamp + Sprayberry) may be the best overall tight/shale play in the US.
jedrider on Wed, 21st May 2014 9:24 am
We can breathe a sigh of relief that California will not be subjected to intense fracking and it’s attending environmental degradation. I hope.
oilystuff on Wed, 21st May 2014 9:26 am
Hee, hee; De-Cline; I like it.
For EUR per well, I agree with you in the Wolfberry.
bobinget on Wed, 21st May 2014 9:34 am
The Wolfcamp Shale lies in both Texas & New Mexico below the Sprayberry Formation consisting of both oil and gas. It is commonly referred to as the Wolfberry Trend, a term used to describe the area of the Sprayberry & the Wolfcamp zones that are comingled. The limestone in this zone can sometimes up to 2,500 feet thick and the shale is 300-800 feet thick. This trend is one of the newest in the region.
Depth: 5,000-15,000 feet.
E&P / Producers drilling wells in the Wolfberry Play
BREITBURN ENERGY PARTNERS L.P.
CLAYTON WILLIAMS ENERGY INC.
CONCHO RESOURCES, INC.
LYNDEN ENERGY CORP.
PIONEER NATURAL RESOURCES CO.
bobinget on Wed, 21st May 2014 9:59 am
Time for some American Rhubarb Pie
Summary of Weekly Petroleum Data for the Week Ending May 16, 2014
U.S. crude oil refinery inputs averaged over 15.9 million barrels per day during the week ending May 16, 2014, 282,000 barrels per day more than the previous week’s average. Refineries operated at 88.7% of their operable capacity last week. Gasoline production decreased last week, averaging 9.6 million barrels per day. Distillate fuel production increased last week, averaging 5.0 million barrels per day.
U.S. crude oil imports averaged about 6.5 million barrels per day last week, down by 658,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.0 million barrels per day, 11.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 997,000 barrels per day. Distillate fuel imports averaged 176,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.2 million barrels from the previous week. At 391.3 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year.
Total motor gasoline inventories increased by 1.0 million barrels last week, and are in the middle of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 3.4 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 2.2 million barrels last week and are in the middle of the average range. Total commercial petroleum inventories increased by 2.1 million barrels last week.
Total products supplied over the last four-week period averaged over 18.9 million barrels per day, up by 1.8% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 8.9 million barrels per day, up by 5.3% from the same period last year. Distillate fuel product supplied averaged 4.1 million barrels per day over the last four weeks, up by 7.7% from the same period last year. Jet fuel product supplied is down 0.3% compared to the same four-week period last year.
Posted Note: consumption is slowly rising right along with the economy. This is the umpteenth week
Oklahoma storage is lower. Seven million barrels lower, is quite ‘bullish’ BTW. (bullish for speculators,
operators, lousy for everyone else)
What we don’t see here is China has been scooping up more crude than usual in anticipation of skirmishes
with Japan and/or Vietnam.
Northwest Resident on Wed, 21st May 2014 12:00 pm
“…the potential for recovering the oil could rise if new technology is developed.”
Yep. And the potential for human colonization of the galaxy could rise if new technology is developed.
Here we are again, waiting patiently for all that “new technology” that is “could” save our sorry asses from the complete mess we’ve made of things down here on planet earth. A little advice: Don’t hold your breath.
This is just one example, no doubt, where recoverable oil estimates have been (dramatically) over-stated. Who can believe any of the “technically recoverable” projections being trumpeted by the oil companies these days when everybody knows (or should know) that their prime directive in this sunset period of the oil age is to keep the investment bucks coming so they can continue fracking and claiming that America is on its way to energy independence.
Don’t think investment bucks are important to the oil companies that are doing the fracking? Think again. Re-read this quote: “The smart money is still investing in California oil and gas,” Zierman said. In other words, don’t pay attention to the fact we got caught far over-projecting. Just keep that “smart money” rolling in so we can keep producing gluts of oil/NG and we’ll be energy independent and exporting to Europe soon enough..
I’m pretty sure that the day American and world investors stop believing in the USA fracking “miracle” is the day that everybody realizes America is flat ass broke and going nowhere but downhill from here. That realization, realized by enough people, would result in a ten-mile high mushroom cloud where the Global Economy used to be.
So yeah, keep making those false projections, keep the “smart money” invested in the companies making those false projections, everything will work out just fine in the end.
Plantagenet on Wed, 21st May 2014 12:12 pm
The oil is still there—it just isn’t recoverable with current technology and at current prices. Thats exactly what the Feds said about the Bakken in 2004, and look at it now.
Northwest Resident on Wed, 21st May 2014 12:16 pm
“The oil had always been a statistical fantasy,” said geoscientist J. David Hughes, author of Drilling California: A Reality Check on the Monterey Shale, an influential report critical of the EIA’s original Monterey estimates. “Left out of all the hoopla was the fact that the EIA’s estimate was little more than a back-of-the-envelope calculation.”
But yeah, it is still there, just not recoverable with current technology. Plant, when is that new and improved technology going to be developed that will make the Monterey oil recoverable? Any ideas?
shortonoil on Wed, 21st May 2014 1:38 pm
A 96% error must be close to the all time record for miscalculations. It is a little reminiscent of estimates made for the Titanic! Technologically extractive does not translate directly into economically extractive; they are two entirely different matters. But, it appears that the USGS has regarded anything that might be technologically extractive, as a resource that actually will be extracted. An assumption, that to say the least, cast some serious doubt on all their estimates for US shale reserves!
As we have been saying all along, shale production does not act as an energy source; it is an energy sink. Its production to date has only been possible because of an energy input from conventional hydrocarbon production, and various central bank actions, and book keeping gimmicks used by the producers. As conventional crude continues on its relentless depletion cycle, and its energy delivery capabilities decline, the economy will continue to follow it down. It won’t be long into the future when a 4% recovery rate for any shale production will be regarded as optimistic.
http://www.thehillsgroup.org
Bob Owens on Wed, 21st May 2014 1:54 pm
This is great news for America! We throw cold water on the shale revolution, stop the thundering herd of oil drillers and see the first glimmer of sanity in our thought reasoning processes (I hope it continues)! Is this the beginning of a turn towards reason and clarity of mind?
Northwest Resident on Wed, 21st May 2014 2:07 pm
“shale production does not act as an energy source; it is an energy sink”
From my point of view, the whole “shale revolution” serves one and only one purpose. To create the widespread illusion of plentiful oil, which in turn is useful in keeping the financial world humming along and in giving the propaganda masters wonderful news to crow about. One of these days in the not too distant future the illusion will evaporate and we will wake up one day to a very ugly and menacing reality that has been there all along, hiding behind the illusion.
J-Gav on Wed, 21st May 2014 3:53 pm
Northwest – Shhhh! You know very well you’re not supposed to see that little man behind the curtain pulling and pushing those levers with a twisted smile on his face!
Northwest Resident on Wed, 21st May 2014 4:27 pm
Can’t help it, J-Gav. That little creepy dude is just annoying the hell out of me. How could I NOT notice him? I don’t entirely understand how so many fail to notice him, but that is obviously due to their lack of perception and observation. These days, what you don’t know and what you don’t see coming CAN definitely lead to very bad results. Keep your eye on that little dude — he has one big lever left that he hasn’t pulled yet. When he does, you better be ready to jump.
Welch on Wed, 21st May 2014 10:24 pm
“The new findings seem certain to dampen that enthusiasm.”
Do ya think?
MKohnen on Thu, 22nd May 2014 1:04 am
And so the “fracking lie” is itself being fracked. I wonder how much this news has to do with the hysteria being shown by the West on the world stage lately? As the fracking lie cracks further, very serious problems for the West will be exposed, and I don’t think I like how TPTB have clearly shown they will handle them.
Cloud9 on Thu, 22nd May 2014 6:02 am
So two thirds of the nation’s shale oil reserves are a clerical error. The 2025 date we had for peak production now is a mirage. I’m guessing the 2015 peak date just got a little more credence. It that is true then we may very well be looking at systemic collapse as early as 2017 or 2018.
FarQ3 on Thu, 22nd May 2014 9:02 am
At 96% error …. or a 2283.3% overstatement!
rockman on Thu, 22nd May 2014 9:38 am
Cloud – Just to be stubbornly picky: the US “reserve” number hasn’t fallen. It’s the “resource” number that has been cut. And resources are not considered recoverable reserves until they are drilled. IOW resources do not represent an estimate of future recover or production so how correct or not they are is of little importance.
And when you say collapse who are you talking about…the US or all economies? And why would you expect economic collapse just because we reached max global oil production on some date? Not because oil prices would surge of that date since price is a function of supply and demand. It’s quite possible that if GPO does happen in 2015 we could see the lowest price for oil at that time then we’ve seen in the previous ten years if there happens to be a significant global recession at that time.
Oil didn’t jump to $146/bbl in ’08 because we reached GPO since we are currently producing more today. And oil didn’t fall to $10/bbl in ’86 because the world wasn’t suddenly flooded with oil. It happened because a global recession destroyed a lot of demand. Granted the past doesn’t always predict the future but throughout history demand has played a much bigger factor in the price of oil then the global production rate.
Church of Bob on Thu, 22nd May 2014 1:37 pm
This is great news for America! We throw cold water on the shale revolution, stop the thundering herd of oil drillers and see the first glimmer of sanity in our thought reasoning processes (I hope it continues)! >>>>>> Well bob I was listening to Warren Olney on NPR yesterday and he asked the so called oil expert from the WSJ if we should be concerned of supplies running out or more of this thing…reporter from WSJ replies oh no! we have 5 to 10 years supply left in the Baaken alone…etc…I am not sure what happens after 5 years but shit….
Cloud9 on Thu, 22nd May 2014 2:23 pm
Rock, First I would submit that the exponential growth we, as in the United States, have enjoyed in the last two centuries were the product of relatively cheap fossil fuels. Second, I would suggest for that growth to continue, fossil fuels, especially oil, must remain abundant. There is considerable evidence that ten of the last eleven recessions were queued by energy spikes. As I recall, the IEA stated in 2010 the conventional oil production peaked in 2006. The great recession started in 2007. I would suggest that based on the supposition that oil had peaked in 2006, the oligarchs came to the conclusion that growth if not over was threatened. That supposition caused them to worry about counter party risk. That worry along with concerns over mortgage resets in the subprime market caused a liquidity freeze which toppled Lehman Brothers and initiated the great recession.
Since 2008 we have been sold the idea that trillions in tax payer debt had to be created to backstop a faltering financial sector and an insolvent government. The argument presented was that the debt did not matter because its damaging effects would be erased by exponential growth. The fracking boom has fueled the general perception that exponential growth can resume. The vast reserves touted to be present in the Monterey formation was part of that narrative. We were told by some cheerleaders that there was enough oil in that formation to allow the U.S. to return to the good old days of oil exportation.
That narrative has sustained faith in the system in the face of dismal employment figures, the housing collapse, the commercial real estate collapse, dismal retail sales in most sectors except gun sales and the decline of real wages for all but the top one percent. Resource wars are breaking out from the Black Sea to the South China Sea. With all of that, hope still prevails.
Now, that the government has come out and stated that only four percent of the oil that was necessary to propel us out of the great recession is commercially viable. The exponential growth narrative is once again threatened. Without exponential growth, debt cannot be repaid and entitlements cannot be met. Once again counter party risk raises its head and systemic collapse is threatened.
rockman on Thu, 22nd May 2014 4:03 pm
Cloud – “… I would suggest that based on the supposition that oil had peaked in 2006”. And there’s one of the problems we run into with the discussion. According to how the EIA defines “oil” there’s no “supposition” required: we are producing more “oil” today then we were in 2006. Of course, some would exclude the condensate, biofuels, etc. from that tally. But those same products have been feeding our hydrocarbon demands for many decades just as more conventional crude oil has so shouldn’t they be included?
And to be picky again you and I have very different definitions of “exponential growth”. Both fossil fuel consumption and the economy in general have grown on a much more linear path then exponentially. But the key has been the relatively consistent, and more important, generally increasing growth. What ever that curve has looked like in the past I doubt many here picture it continuing as such too much further into the future.
“The fracking boom has fueled the general perception that exponential growth can resume”. Only to those who don’t realize that oil prices, having increase 300% in just the last ten, have dampened growth. How much oil production the US has increased has no bearing on the economic growth of the US per se (with the exception of growth in the oil industry). The US economy now transfers about $400 billion MORE per year to oil producers then it did ten years ago. And the same dynamic for the rest of the world. If someone is unable to see the huge negative effect this would have on growth they are delusional IMHO.
“that only four percent of the oil that was necessary to propel us out of the great recession is commercially viable.” And who would believe such an absurd statement. The volume of oil being produced has no impact on anyone’s economy. It’s the cost of how ever much energy that is being utilized that affects growth. Not the only factor, of course, but a significant one.
Cloud9 on Thu, 22nd May 2014 8:44 pm
Rock, I know that you know more about oil production than I will ever know. My point was that it was believed that oil had peaked in 2006. That belief precipitated the collapse of 07/08. I think the drastic reduction in the prediction of how much oil is going to come out of Californian has the same potential to shake the trust in growth. If the oligarchs are shaken, there will be a rush to the exits and capital will freeze again. Another TARP may not be politically possible. If not done, the banks fail. If done, it may shake the remaining faith in the currency and cause a rush to get out of dollars. Either way, the system collapses.