EARTHWORKS

California Oil Deposit Is Far Smaller Than Predicted

U.S. Slashes Estimate of Technically Recoverable Crude From Monterey Shale by 96%

Wall Street Journal | Russel Gold

May 21, 2014
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The U.S. government slashed its estimate of how much crude oil could be extracted from California's Monterey Shale, confirming widespread industry suspicion that developing the massive resource would be difficult.

The Energy Information Administration said there are 600 million barrels of technically recoverable oil, down 96% from its estimate a year ago of 13.7 billion barrels.

Officials said that while they still believed that there is an enormous oil deposit in the shale, which is beneath a 1,750-square-mile portion of central and southern California, the crude can't be tapped with existing technology and at existing prices.

"The rocks are still there," EIA Administrator Adam Sieminski said Wednesday. "The technology's not there yet." The agency, the statistical arm of the Energy Department, said it lowered its estimate based on new geologic information and the lack of production growth.

The oil industry nevertheless will likely continue trying to develop new techniques and technology to tap the Monterey Shale economically.

"We haven't found the magic formula to harness the Monterey Shale, but we have a lot of smart engineers working on that every day," said Rock Zierman, chief executive of the California Independent Petroleum Association trade group.

The EIA has been wrong before, Mr. Zierman said, citing its assessment in the mid-1990s that there were only 151 million barrels of recoverable reserves in North Dakota's Bakken Shale. Today, thanks to enhanced hydraulic fracturing-techniques developed in the mid-2000s, the rock formation produces about 1 million barrels a day.

The industry has used a combination of fracking and horizontal drilling to turn the Bakken and the Eagle Ford Shale of southern Texas into huge oil fields. Some industry officials had hoped the same would happen in California, but the geology of the Monterey formation is riddled with faults, its oil is deeply buried and its rocks aren't as amenable to fracking as elsewhere.

The new reserve figure was earlier reported by the Los Angeles Times and later confirmed by the EIA. The official report is expected to be released next month.

Some fracking opponents seized on the government data to pressure state officials. Jennifer Krill, the executive director of Earthworks, an environmental group, urged California Gov. Jerry Brown to "face facts [and] order a moratorium on fracking."

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