But what if the boom is just a bubble?
IMPORTANT UPDATE: In May 2014, a few months after the publication of Drilling California, the Energy Information Administration downgraded their estimate of technically recoverable tight oil in the Monterey Formation by 96% — corroborating our analysis and criticism.
Written by PCI Fellow J. David Hughes and published in partnership by Post Carbon Institute and Physicians, Scientists & Engineers for Healthy Energy, this report provides the first publicly available empirical analysis of actual oil production data from the Monterey Formation, including from wells that have undergone hydraulic fracturing and acidization. It lays out some of the play’s fundamental characteristics compared to other tight oil plays, including geological properties, current production, production potential, and associated environmental issues.
Unlike previous studies looking at potential production and economic impacts, this report is based on analysis of real production data (compiled in the most comprehensive oil and gas production database publicly available) and should therefore help ensure that public policy decisions on the development of the Monterey are grounded in data, not assumptions.
The 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.
Prospects for Tight Oil Production in the Monterey Formation
Why These Findings are Important
Environmental concerns with development of the Monterey shale are centered around hydraulic fracturing (fracking), the main completion technique used in other tight oil plays. Acidization completions, using hydrofluoric and hydrochloric acid, are also of concern. It is certain that hydraulic fracturing and acidization completions have already been used on the Monterey shale, yet an analysis of production data reveals little discernible effect of these techniques in terms of increased well productivity. Many oil and gas operators and energy analysts suggest that it is only a matter of time before “the code is cracked” and the Monterey produces at rates comparable to the Bakken and Eagle Ford. Owing to the fundamental geological differences between the Monterey and other tight oil plays, and in light of actual Monterey oil production data, this is likely wishful thinking.
For all of these reasons, this analysis suggests that California should consider its economic and energy future in the absence of an oil production boom from the Monterey shale.