Government Cuts California Oil Reserve Estimates 96 Percent

By:  Bob Adelmann
Government Cuts California Oil Reserve Estimates 96 Percent

The joyous celebration by environmentalists that California's Monterey shale oil formation is presently inaccessible will likely turn out to be premature.

A federal agency reported Tuesday that its previous estimate of the amount of recoverable oil from California deposits was way too optimistic. Its 2012 estimate that the Monterey formation contained 13.7 billion barrels of recoverable oil was cut to 600 million barrels, just four percent of its previous estimate. Adam Sieminski, head of the Energy Information Administration (EIA), said:

The EIA concluded that the technical recoverability of Monterey shale did not look as strong in 2014 because of the industry’s difficulty in producing from the region….

Not all resources are equal. It turns out that it is harder to crack the reservoirs and get the oil flowing from the Monterey [than from the Bakken or Eagle Ford formations].

        The rocks are still there. The technology is not there yet.

The lead analyst for EIA, John Staub, explained why there was such a sharp and surprising downgrade on reserves that many in California were hoping would spark a boom in both new jobs and new revenues for the state:

From the information we’ve been able to gather [from oil producers in the region], we’ve not seen evidence that oil extraction in this area is very productive….

Our oil production estimates combined with a [lack] of knowledge about geological differences among the oil fields led to [our previous] erroneous predictions and estimates.

Previous estimates were that development of the Monterey formation, which stretches 1,750 miles underground from Sacramento to Los Angeles, could generate 2.8 million new jobs and boost state revenues by $24.6 billion a year. With the new numbers, job gains might be closer to 100,000 and new revenues at less than $1 billion.

The Monterey formation has been described as “folded,” “jumbled,” and “shattered” instead of neatly piled up like a stack of pancakes as in North Dakota’s Bakken or the Eagle Ford formations in Texas, making it more difficult and costly for oil companies to extract the oil deposits. At the moment, according to Staub, production from the Monterey formation is “stagnant.”

The surprising downgrade has predictably delighted environmentalists, who would rather have the oil remain in the ground.

Click here to read the entire article.

Photo of oil welling up from the Monterey formation

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