TheBakersfieldCalifornian.com

A report out of Wall Street Tuesday casts doubt on the potential of the Monterey Shale, a huge "source rock" oil reservoir attracting large investments to Kern County.

The Monterey -- officially estimated to have 15 billion barrels of oil, or several times more than North Dakota's booming Bakken formation -- has not lived up to expectations that it would add 300,000 barrels a day to California oil production, wrote Bob Brackett, an analyst with global asset management firm AllianceBernstein.

"Instead California production is flat," the report states.

Titled "The Mystery of the Missing Monterey Shale," the report discusses possible reasons for the formation's underperformance, including its abundance of natural faults, low reservoir pressure and a geological profile somewhat resistant to fracking, the controversial technique also known as hydraulic fracturing.

"We don't expect a 'Bakken Boom' to strike the San Joaquin Valley," the report states.

Such skepticism is not entirely new. Local industry insiders have noted the Monterey's slow production rates, blaming it on the reservoir's varied geology. But they generally write it off as a sign that local engineers need more time to "figure out" how to bring new technology to bear.

If the report holds true, however, and the formation is indeed more akin to a traditional, long-term opportunity than a Bakken-like "fractory," it could hurt Kern's growing reputation as a re-emerging oil region. It would also dampen optimism that production of the reservoir will greatly boost local job creation and property tax revenues while also reducing California's dependence on imported oil.

Industry spokesman Tupper Hull, vice president of the trade group Western States Petroleum Association, had not seen the report but said the Monterey's unique geology may indeed pose a challenge.

"Whether or not it can be developed on a large scale with, you know, current technology is ... kind of an open question," Hull said.

AllianceBernstein noted in its report that none of the firm's clients have large stakes in the Monterey. It listed Occidental Petroleum Corp., Venoco Inc., Plains Exploration & Production Co. and Berry Petroleum Co. as being among the largest owners of acreage in the Monterey. It said Chevron Corp. and Aera Energy LLC also own property in the formation, though they have been quiet about how much.

At any rate, the quality of the real estate may be much more important than the quantity, simply because of the formation's geology, the report states.

"Large acreage positions increase the probability of finding an attractive development opportunity but are not valuable in and of themselves unless a quality development opportunity is available," the report states.

Several industry people, including representatives of Oxy and Aera, declined to comment on the report Tuesday.

Randy Adams, Bakersfield's former top oil regulator, had not reviewed the report but said the Monterey's rate of production may yet depend on what technology is used to tap the formation. Even so, he downplayed some of the high hopes surrounding the field.

"Whether or not it's going to be a shooting star kind of thing, (that has) certainly not happened yet," he said. "Maybe its future is going to be just slow and grow, depending on how technology grows."

Discovered as early as 1986 but not actively exploited until a few years ago, the Monterey Shale underlies all of California's most productive oil fields, including Elk Hills, Belridge and Midway-Sunset. It is believed to stretch through much of the southern Central Valley and even extend well offshore in Southern California.