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Fossil Fuels

Published on May 22nd, 2014 | by Tina Casey


Monterey Shale: Fracking’s Great Moment Of Derp

May 22nd, 2014 by  

The US energy world was rocked yesterday by a new Energy Information Agency report that significantly cut the projection of recoverable oil from the massive Monterey Shale formation in California. That’s “cut” as in chopped, shredded, and mashed to a bloody pulp. How bad is the damage? Well, just a few years ago in 2011 the projection was for 13.7 billion barrels, and yesterday’s update brought it down to about 600 million. That’s a 96 percent drop for those of you keeping score at home.

How’d the Monterey formation go from boom to bust in just three years? Just a quick note to our readers before we dive in. We’ve spilled a lot of ink on shale gas issues here at CT, so in case you missed it, the emphasis here is on shale oil (also not to be confused with oil shale, which is a whole ‘nother can of worms).

Monterey shale courtesy of PCI

Monterey shale (cropped) courtesy of Post Carbon Institute.

Monterey Shale Oil — The 2011 EIA Report

The seeds of the debacle are actually right there in an EIA report dated July 8, 2011, titled Review of Emerging Resources: U.S. Shale Gas and Shale Oil Plays.

It starts off with a clear warning, as in “estimating the technically recoverable oil and natural gas resource base in the United States is an evolving process,” and it goes downhill from there.

The report notes “considerable uncertainty” in general regarding the recoverability of shale gas and oil, given the current state of drilling technology and the prospect of shifting market conditions.

Despite the optimistic projection for Monterey shale in 2011, the report contains a critical caveat:

…the resource estimates in the current report will be modified over time as more wells are drilled and completed, technologies evolve, and the long-term performance of shale wells becomes better established.

One important factor that EIA considered in hedging its bet so clearly is the absence of a meaningful history of production upon which to draw. The agency did take the experience of other formations into consideration, but it could not project that onto the Monterey Shale formation with certainty:

Because most shale gas and shale oil wells are only a few years old, their long-term productivity is untested. Consequently, the long-term production profiles of shale wells and their estimated ultimate recovery of oil and natural gas are uncertain.

In addition, EIA noted that most of the new shale production was taking place, naturally enough, within the most promising or already proven areas of shale formations. That makes it difficult to generalize for the purposes of projecting results from one formation to another.

Also throwing off the comparison between formations is the sheer size of some shale formations, making it difficult to assemble a reliable formation-wide estimate of recovery.

Monterey Shale: The 2014 Debacle

Reuters has a good update on the latest EIA announcement, including confirmation that yes, the estimate dropped by 96 percent. Apparently some folks did not get the 2011 memo and had trouble believing what they were seeing.

For that matter, it seems that a critical analysis of the 2011 EIA report by the Post Carbon Institute sailed over everyone’s heads, too.

The Post Carbon report came out just last year. It took the EIA report to task for placing too much emphasis on the experience of Bakken and Eagle Ford shale operations. Post Carbon also notes that EIA failed to fully account for variations in Monterey shale formations, though to be fair EIA did place that aforementioned caveat emptor sticker on both of these points.

The Post Carbon report adds quite a bit of detail, for example this:

An analysis of every well producing from Monterey shale reservoirs reveals that average initial productivity is less than half of the typical horizontal and vertical shale wells assumed in the [EIA report], and less than a quarter of the “typical Elk Hills vertical shale well.”

…and this:

Fracking and acidization have doubtless been tried extensively on Monterey shale wells, yet the data do not show any significant increase in initial well productivity or likely cumulative oil recovery for recent wells.

…and this:

The majority of oil produced from the Monterey appears to have migrated, owing to the fractured nature of much of the Monterey. The existence of very extensive areas of uplifted mature source rock with non-migrated oil comparable to plays like the Bakken is highly speculative.

On the bright side, EIA based its estimate on initial production difficulties in Monterey shale. The estimate could swing in a positive direction if there is a technologically resolvable problem for at least parts of the formation, and the industry comes up with a solution.


However, the low estimate could also solidify for any number of reasons, for example if the technology solution proves too expensive, or if the price of oil drops, both of which would reduce the competitiveness of Monterey shale oil in global markets.

Also contributing to downward pressure on oil prices is new competition from alternative sources, namely solar and wind, in tandem with the prospect of competitively priced battery electric vehicles and fuel cell EVs. The wind angle will be particularly interesting now that the US has finally begun to tap into its massive offshore wind potential.

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About the Author

specializes in military and corporate sustainability, advanced technology, emerging materials, biofuels, and water and wastewater issues. Tina’s articles are reposted frequently on Reuters, Scientific American, and many other sites. Views expressed are her own. Follow her on Twitter @TinaMCasey and Google+.

  • joules48084

    A lot of this foolishness will become apparent when EPA-driven shutdowns of generation capacity will lead to extensive brown-outs…then coal will start looking good again when i-Pads and smart-phones cannot be recharged by the masses.

    • Ronald Brakels

      Australia has an excess of both coal and gas generating capacity resulting from a decrease in grid electricity use. This has occurred despite Australia having the strongest economic growth among developed nations since the Global Financial Crisis and has been driven mostly by improvements in efficiency and the uptake of rooftop solar. Personally I am of the opinion that something similar is starting to occur in the United States, though it may not happen quite as dramatically as it has in Australia.

      • Rick Kargaard

        I think you may be right. It is not driven quite so urgently in the U.S. as I believe electric rates are lower in most cases. Also rooftop installations are not as popular in snowfall areas. I also think people are starting to consider conservation as cost effective

  • justright

    Solar and Wind are the best Trojan horse for carbon fuel.
    Last year Solar energy supposable add 5000mw of capacity nation wide. Unfortunately Solar energy on its finest month of energy output will only create about 13% of the 5000mw reported in capacity. Or about 650mw of actual power. Solar on its worst months might get 9% production. Or about 450mw of actual power for this so called massive increase of solar capacity.
    But there is good news. Natural gas power plants will fill in the 87% or 93% vacuum created by these super subsidized feel good allusions of power.
    Unfortunately the poor and middle class folks will continue to lose with the steady increase in cost of this combination of power production capitol investment in actual power generated.
    The anti carbon fuel movements continue to increase the profits of the Oil and gas industry. Coal has taken it on the chin. But oil & gas and utilities are smiling all the way to the next dividend payout.
    The Monterey shale problem is simple; California’s hate all carbon fuels, all aspects of extracting carbons, and do not mind paying more for fuel. I am happy to see they are also moving towards anti-nuclear and shutting down reliable base load power. Once again this hypocrisy will lend to financial smiles each quarter for utilities, oil and gas companies and all who invest in them. All the while, California’s can continue to feel good sitting in their cars on the largest parking lots known as the California highways.

    • Ronald Brakels

      Justright, you have either made a mistake or been misled. The capacity factor for solar in the US does not average below 13%. If you check you’ll see the correct figure is considerably higher.

      • justright

        Hi Ronald,
        Here is a real solar system set of numbers:
        9.6kwh system
        890 days since installed
        9.6 X 24 X 890days =205056kwh “maximum capacity”

        Actually power produced:
        32892kwh actual maximum capacity
        32892/205056 = 16% for the full life of this system.

        Looking at the actual hourly output over the last 3 days, it had at its highest production hour 7.1 kwh, right next to other hours that produce 1.5 kwh in the middle of a day. Of course over those 72 hours it had over 36hrs that produce 0 power. So I understand it does not work at night and is highly variable during the day. A 9.6 kwh natural gas generator at location would have maximum capacity of 205056 kwh. apples to apples comparison.
        Other interesting numbers of this system:
        30K installed 2.5 years ago;
        Paid 9 cents a kWh from utility company for the next 10 years.
        That is excellent! Today you might get 4cents kwh.
        Provides about 10% of the power for the small business;
        Received $2960 since installed, $3.325/day since installed;
        24.7 years straight up pay out on 30K;
        If we include buying the 10% more power because we hadn’t installed the system, it would pay out in about 12 years. But time value of money and what I would earn on the original 30K is not in the calculation. We paid cash for our system.

        So for the other 84% of the time during a calendar year, fossil fuels power will be required. That is my point on Solar Capacity, or any other interment system.

        I haven’t crunched the numbers but I wonder if we had installed a natural gas generator and paid for the natural gas but got paid 9cents kwh for the electricity it produced, what would the numbers look like? I bet it pays out really fast and becomes a revenue generator….

        Nice discussion!

        • Benjamin Nead

          Sounds like you hate your PV panels, justright. I’ll take the whole system off your hands for $100.

          • justright

            Benjamin, Bengamin, Now that would the definition of a bad investment. Good try though.

        • jeffhre

          Your actual capacity is 9.6 KW. Do you normally pay cash for everything purchased for the business? Seems like paying a small or no down payment instead, combined with saving on your energy bills, and getting the benefits of system depreciation would yield a much higher return on invested capital. And would allow you to keep the $30,000 system price to invest in business operations.

          • justright

            Because we own it, we can depreciate it. If somebody else owned it then we couldn’t. We installed the system when the subside was incredible. 9 cents a kilowatt hour is awesome. We could of had one of the solar companies install it on our roof and they would have given us 2 or 4 cents for the energy and kept the other 7 to 5 cents. They would have most likely got additional subsides has a solar install company and operator that we didn’t qualify for as a small business doing it ourselves. Yes that would have saved the 30K upfront but they build in automatic increase going forward. The utility and solar companies will get their money. There are many places on your utility bill that they can increase cost. I drew the line of letting them automatically increase the cost per kilowatt hour over the next several years. In the last 6 years the cost of NG and Coal have been way down and NG is only up a little in the last year. So the actual cost gets fuzzy when the utility company lowers the cost in one part of your bill and raises it in another.

            We did discuss the cost of the system and basically concluded before install that it would not payout any time soon and be a bad investment straight up. But if we market that we are a green company, maybe it would lead to a few additional sales. Thus we jumped on the green bandwagon reached out to people looking for companies going green. We have no way of knowing if will pay off yet business is booming and we all feel good we are green.

          • Offgridman

            Don’t know if you will see this with the response being after such a long time, but for just in case.
            This is just my opinion, but I think that you got ripped off by your installer or went with the cheapest bid/least knowledgeable one.
            My 2.7 Kw system produces 21 Kwh /day as a year round average over the past seven years. Of course it is one that I built and installed myself as at that time panels were averaging 4-6$/watt. So wanting to be sure that every available amp was utilized over wired the system to a 120% capacity, and over sized the charge controller /inverter so that our average usage would only utilize 60% of capacity. Even though at that time the recommendations were for wiring to handle 80% of capacity, and to keep costs down to exactly match charge controller/inverters to system size. But this way with MPPT equipment which has now become the standard for grid tied farms it is possible to utilize every amp produced.
            If you want to be truly green get an independent auditor and spend the extra five or ten grand to make your system work right, and you will see that peak production for 4-6 hours a day year round.

  • Rick Kargaard

    Reserves really do not mean much. It is production (supply) and demand that sets prices and determines use (demand). There simply is not enough oil and gas to sustain our current increasing international usage for long. Eventually, demand will drop as oil and gas become unaffordable. Without renewables taking up the slack, world economies will grind to a standstill.
    Coal is a little different. There is a much larger supply, and it will last a lot longer at current usage. But do we want to use it?
    Global warming will likely take 200 years to have a significant effect. We are much closer to significant shortages and higher prices for food and other essentials as a result of energy constrictions.
    Oil and gas production in the U.S. expanded greatly in recent years. A result of political will and high prices. This forced the price of gas down to unrealistic levels for a while. Partly because it lacks a world wide distribution and market. It is worth it to note that oil has continued to trend up in price.
    All of this extra production is only reducing available oil at a faster rate. You are spending your retirement fund.
    Alternative energy sources and the methods of utilizing them, to replace fossil fuels, are absolutely essential if we hope to preserve any semblance of our current standard of living.
    It is even more important if we hope to raise the standard of living for the two thirds of the world that does not enjoy our prosperity.

    • Ronald Brakels

      Rick, global warming is already killing people in Australia.

      • Rick Kargaard

        That global warming, if in fact it is the cause, has already happened. it is the future that is in contention.

  • johnnygeneric

    Battery powered vehicles are not competitively priced. What a silly and uninformed statement. Solar and wind have no effect on oil prices since oil is generally NOT used for power production. Coal, nuclear and natural gas are by far used more for power. Oil in the US is mainly used for fuel for automobiles, trucks and rail. It can be used for petrochemicals, too, but in the US natural gas is the feedstock most used.
    References to fuel cell EVs are irrelevant. They are but a speck of a speck in total usage on the highway.

  • Gord Tulk

    This is more a technology story than a reserves story.

    The oil is still there – and in very large quantities.

    What isn’t there – yet – is the technology tweaks to the current frack and other tools to extract it economically.

    This is hardly the first time that this is happened – most of western North America was left for dead until horizontal and then frack came along.

    One would be very foolish or very biased against fossil fuels to declare this area forever unrecoverable.

  • How would they frack on either side of the San Andreas fault and other fault lines?

  • Banned by Bob

    Here are some Fracking opponents caught in one of their finer moments. I guess going to the Beverly Hills Hotel wasn’t too much for their sensibilities; ends justify the means you know.

    I guess they must have felt if it was ok for Al Gore to raise Mideast oil $, the door was open for them.



  • Kyle Field

    Now we just need a similar discovery in ANWR for renewables to become critical to national (energy) security…

  • JamesWimberley

    Exxon-Mobil, Shell, and BP have all tiptoed to the exit on shale gas. They are not paragons of virtue, but nor are they in the con artist business of sucking in money from the rubes and bailing out before the crash.

    Should we welcome progress on laser-asisted drilling (link)? It’s essential to make EGS geothermal viable, unlocking the vast 24/7 resource of deep hot dry rocks. On the other hand it would also make it cheaper to get at unconventional oil and gas and prolong this unwanted boom.

  • Michael Berndtson

    This happened for the Marcellus shale in Appalachia. The early estimates or sales pitch number was 400 to 500 trillion cubic feet of natural gas. After production based analysis by US Geological Survey and industry the proved reserves (feasibly recoverable based on economics, available technology and flow of fluids through ultra-tight porous media, i.e. shale) went down to about 30 to 60 trillion cubic feet. Again, about 90 percent drop.

    The only shale formation that went up is the Bakken and Williston Basin shale in North Dakota and Montana. But that is a whole other kettle of fish.

    All that fracking does is turn a well sink (the opening of the well for fluids to flow from the formation – also called the well screen) from a finite area (well diameter times the length of screen) to an almost infinite well screen area (the surface area of fractures plus the surface area of manufactured fractures intersecting natural fractures. The bigger the well sink area, the greater the possibility of hydrocarbon extraction. The problem is that there is so much restriction to physical flow through the tight tight shale and restriction to mass transfer of hydrocarbons attached to the shale particle surface (desorption and other phenomena). That’s why shale oil and gas wells production numbers sink faster than conventional wells – completed in rock like sandstone and limestone.

    All this was studied as early as 1978 by the DOE and USGS for development of eastern shales. The problem is that oil and gas salesmen and landmen don’t want to read those lengthy and boring investigation reports. They’ve got investors to roundup. The sales numbers usually come from the estimated volume of the shale times the organic fraction (percentage of hydrocarbon in the rock). Which is usually a really big sexy number. And makes everyone excited about getting rich. That and million dollar consulting contracts to former politicians.

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