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The Big Losers in the Monterey Formation

The L.A. Times spilled the beans last week that the Energy Information Administration is set to severely downgrade the Monterey Shale in California in an upcoming report. Once thought to hold 13.7 billion barrels of technically recoverable oil, the EIA now believes only about 600 million barrels are accessible. Slashing technically recoverable estimates by 96 percent could be enough to kill off the shale revolution in California before it really got started.

But why is the difference between the two estimates so staggering? Much of the hype surrounding the Monterey was based off a rudimentary 2011 assessment by Intek Inc., an engineering firm based in Virginia. The firm was so off on its projection of recoverable oil reserves because it used some shaky assumptions – and essentially concluded that the shale revolution going on elsewhere in the United States could easily be replicated in California despite there being key differences.

However, there have been warning signs before this report. According to an impressive report put together by geoscientist J. David Hughes late last year, the Monterey has very little in common with the Bakken or Eagle Ford, and he concluded that the Monterey formation would never live up to its billing.

For example, with less than a few hundred feet of thickness, the much older Bakken and the Eagle Ford formations are predictable and straightforward. The Monterey, on the other hand, is often over 2,000 feet thick. Also,…

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