Essay about Oil Industry: The Monterey Shale

Essay about Oil Industry: The Monterey Shale

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Monterey Shale Brief


For several years, the Monterey Shale, a 1750-square-mile area in central California, has been the focal point of optimistic speculation by oil industry players, due to the vast amount of oil that lies under the region’s subterranean rock. These players received some unwelcome news last week, when the US Energy Information Administration (EIA), which monitors the nation's energy reserves, reduced its estimated amount of technically recoverable reserves (TRR) by 96%, citing production difficulties from initial wells. With existing technology and at existing prices, the EIA now predicts that only 600 million barrels of oil can be extracted, even using the advanced extraction techniques of acid treatments, horizontal drilling, and fracking. The reduction marks the second time in two years that the EIA has adjusted its estimates for the Monterey: in 2012, it cut its forecast from 15.4 billion barrels to 13.7 billion barrels. The newly revised, much lower estimate has weakened hopes that oil activity would have significant employment and tax benefits for the Californian economy.

What's Next

Although the reduction is dramatic, it is important to remember that as a measure, technically recoverable reserves are more a reflection of current technology than the shale’s long-term potential. Estimates of TRR regularly change with the development of new drilling techniques and fluctuations in the price of oil. The latest EIA adjustments do not change the amounts of oil present in the Monterey Shale; rather, they represent a more pessimistic take on how much oil can be recovered with extraction technology as it exists at present.

Going forward, active players in the Monterey are unlikely to slow t...

... middle of paper ...

...ely unlock the full potential of the Monterey Shale. Last year, an effort to institute a moratorium failed in the California Legislature and all other proposals for a moratorium have been put on indefinite hold.


While the EIA’s reduced TRR estimates do represent a setback for the expansion of oil production in California, it is important to remember that the story of oil exploration in the United States is one of technological innovation. The GDP, tax revenue, and employment benefits that have been touted are unlikely to materialize along the assumed timelines, but the EIA’s report may serve as the impetus for increased investment in oil recovery technology because there is so much potential. Thus, while the new assessment may hurt the state economically in the short term, in the long run it may even inspire more exploration and production activity.

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