California's Monterey Formation Zeroing in on a New Shale Oil Play?

Monterey Shale, California's Primary Petroleum Source Rock, Unlocking Its Complexities

The golden state’s Monterey Formation has been garnering a great deal of attention as a possible emerging liquids-rich shale resource that not only rivals plays such as the Bakken and Eagle Ford but towers above them in potential. Where did this news originate, what does it mean, and how does the Monterey’s future seem to be unfolding?

An Intriguing Report

In July 2011, the US Department of Energy’s (DOE) Energy Information Administration (EIA) issued a report titled “Review of Emerging Resources: US Shale Gas and Shale Oil Plays.” The introduction to the report clarifies that it is presenting a review of such resources only within the US lower-48 onshore area. The information presented in the review is based on a report, with the same title, which was prepared by INTEK, Inc. for the DOE, and is dated December 2010. 

The report identifies 19 significant shale gas plays in the US onshore lower-48 area—plays labeled, in a table, as “unproved discovered technically recoverable resources.”

It also named four significant shale oil plays in the US onshore lower-48 area—plays labeled, in a second table, as “technically recoverable resources” (i.e., not “unproved and discovered”). These shale oil plays are identified as the Eagle Ford; the Avalon and Bone Springs (within the Permian Basin); the Bakken; and the Monterey/Santos.

The Monterey/Santos play was estimated, according to the report, to contain 15.42 billion bbl of technically recover-able shale oil resources, amounting to around 64% of the total resources in the four shale oil plays examined. This estimate has generated significant interest, due to its vastness, particularly when weighed against current heated shale oil activity in the three other shale oil plays cited.

Overall US crude oil production has risen steadily since the month the report was issued, from a July 2011 average of approximately 5.6 MMB/D to a December 2012 average of 7 MMB/D. According to EIA monthly statistics, which are derived from a combination of estimates and actual data reported by federal and state agencies (with estimates supplanted by actual data as reported data gradually become available over time), increasing oil production in North Dakota (the Bakken) and onshore Texas (Eagle Ford and Permian Basin) drove the surge in overall US crude oil production.

Increased oil production stemming from the Monterey/Santos play has yet to materialize.