Oil

Wednesday, May 21 2014 05:00 PM

Estimate of recoverable Monterey Shale oil slashed

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By THE ASSOCIATED PRESS

The amount of oil that can be recovered from California's sprawling Monterey Shale formation using existing technology is far less than thought, according to a new federal estimate that potentially deals a blow to oil companies looking to extract the resource.

About 600 million barrels of oil can be tapped from the formation, the Los Angeles Times reported, citing data from the U.S. Energy Information Administration.

The new figure, which is expected to be released next month, falls short of the previous estimate of 13.7 billion barrels of recoverable oil that led to a speculation boom among oil companies.

The Monterey Shale, a 1,750-square-mile area stretching from the agricultural Central Valley to the Pacific Ocean, is home to one of the largest deposits of shale oil in the nation. A report released last year by the University of Southern California and partly funded by the oil industry estimated that exploitation of the Monterey Shale formation could add 2.8 million new jobs and boost tax revenues by $24.6 billion per year.

Accessing the oil deposits, however, has proven difficult, largely because of the geology. Unlike other shale deposits around the country, the Monterey Shale is more uneven and the oil is buried deeper. Some companies have used hydraulic fracturing, which pumps massive amounts of water, sand and chemicals to break up rock formations, with mixed success.

"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," John Staub, an analyst who led the energy agency's research, told the Times.

The original estimate in 2011 was done by Intek Inc., a Virginia-based engineering company. The company'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," Intek senior associate Christopher Dean told the newspaper.

Despite the lower estimate, the oil industry said it is hopeful new techniques will open up the 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 Association. "As the technologies change, the production rates could also change dramatically."

The California Independent Petroleum Association, which represents independent exploration companies, said it's still worth investing in California oil.

"The oil is there," chief executive Rock Zierman said. "But this is a tough business."

Environmentalists cheered at the news and hoped this would curb interest in the Monterey Shale.

"California needs to focus more on developing and advancing clean fuels and renewable energy. Relying on oil leads to an economic dead end," Kathryn Phillips, head of Sierra Club California, said in a statement.

-- Information from Los Angeles Times

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