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Monterey Shale's Potential Questioned in Study

A recent study sponsored by two anti-hydraulic fracturing (fracking) organizations calls into question the bullish estimates for California's Monterey Shale. "Drilling California: A Reality Check on the Monterey Shale" is an analysis of previously released bullish production estimates of 15.4 billion bbl (see Shale Daily, Sept. 13, 2011).

Researcher J. David Hughes, a geoscientist who has studied Canadian energy resources for nearly four decades, concludes that past work by the U.S. Energy Information Administration (EIA) used "highly questionable" assumptions about widespread  prospects in the Monterey. And representatives of the two sponsoring organizations, the Post Carbon Institute and Physicians, Scientists and Engineers for Healthy Energy (PSE), are touting the results as a reason California officials should back off from their support for shale development as an economic stimulus.

Hughes is president of the consulting firm Global Sustainability Research and is member of the PSE board. In 2011, Hughes published a series of papers on the production potential and environmental impacts of U.S. natural gas.

PSE and the Post Carbon Institute characterized Hughes' work as the "first publicly available empirical analysis" of oil production data from the Monterey Formation, using a standard industry data base (DrillingInfo). Previously, Houston-based Wood Mackenzie researchers and others concluded that the Monterey is likely to live up to most of its hype (see Shale Daily, July 5, 2012).

Hughes compares the Monterey with both the Bakken and Eagle Ford and finds it lacking for the type of topography it has (thick and complex) and the relatively small amount of square miles for which it extends (2,000 square miles), compared to both the Bakken (20,000) and Eagle Ford (8,000).

"Completion techniques like hydraulic fracturing that 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," Hughes said.

He concludes that the EIA estimate of 15.4 billion bbl is "likely to be highly overstated. Certainly some additional oil will be recovered, but this is likely to be only modest incremental production -- even using modern production techniques such as high-volume fracking and acidization."

California's more than two decades of decline in production may be "temporarily offset," but it is not likely to create a statewide economic surge, said Hughes, causing a representatives of the supportive Environmental Working Group to call on California Gov. Jerry Brown to reconsider his supportive position for more oil development.

"It is clear from our data analysis that oil production from the Monterey is not likely to be the major economic opportunity that previous studies have indicated," said PSE Executive Director Seth Shonkoff at a press conference introducing the Hughes study.

Earlier this year, after Brown expressed confidence that California's oil and gas regulators would apply "science and common sense" to fracking regulations, a study released by the University of Southern California and a Los Angeles-based think tank projected nearly three million new jobs from development of the Monterey (see Shale Daily, March 19). The study was partially funded by the Western States Petroleum Association.

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