The Energy Information Administration (EIA) said in 2011 that the giant shale formation held as much as 13.7 billion barrels of technical reserves, hoisting the Monterey into the upper echelons of world-class resource plays.
But after evaluating ongoing production difficulties from initial wells, the EIA cut that estimate to 600 million barrels.
“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,” EIA head Adam Sieminski was quoted as saying.
The new estimate was first reported by the Los Angeles Times and the EIA’s detailed report on the reduced estimate is expected to be released next month.
The Monterey shale, where the oil content is unquestioned, has vexed drillers hoping to unlock the bounty with completion technologies such as hydraulic fracturing and acidisation that have opened up vast reservoirs of oil in places like North Dakota and Texas.
But unlike those states, where geological strata are relatively flat, California’s geology is twisted and shattered making oil far more difficult to recover.
Industry groups have pointed out that just because the oil is not currently recoverable, technology could well be available in the future. After all, the oil and gas resources in most shale formations were thought to be unrecoverable just a decade ago, and were freed up by technological advances.
The downgrade is likely bad news for smaller California operators like privately held Venoco, which has numerous Monterey shale leases.
Occidental Petroleum said in February that it was spinning off its California business into a standalone company. Analysts at the time said that business could be worth $16 billion to $19 billion, based on its assets, revenue and growth profile. It was unclear how the new estimate would affect the spinoff.