Do You Know The Way To Monterey?—Pitfalls and Potential In A California Play

Estimates of how much oil or natural gas are “technically” or “economically” recoverable are moving targets. Until just a few years ago, the hydrocarbon-producing potential of the Bakken, the Permian and the Marcellus were vastly underestimated—hardly anyone would have wagered in 1995 that North Dakota, West Texas and northeastern Pennsylvania would emerge as oil and gas hotspots. So what are we to make of California’s Monterey tight oil play, which as recently as 2011 was hailed as the next big thing for tight-oil production, but which is now on just about no one’s mind? Today, we consider what it might take to turn a hydrocarbon frog into a prince.

U.S. oil production dropped to 8.6 MMb/d in 1986, and it continued falling for the next 22 years, bottoming out in 2008 at an even 5 MMb/d. Since then, as we all know, oil production’s been on the rise, and in 2014 it proved that it’s back by hitting the exact 8.6 MMb/d mark it registered when the production decline started in the mid-1980s. Few but the most cockeyed optimists would have guessed in 2008 that the strong, sustained recovery in domestic production we’ve witnessed the last seven years was possible. Behind that oil-production decline and resurgence were ever-changing estimates of how much oil was technically and economically recoverable--particularly from tight-oil/shale plays, which weren’t on most people’s radars in the 1980s and 1990s. Before we look at California’s Monterey tight oil play (whose potential appeared to go from boom to bust in less time than it takes to wear out a good pair of boots), let’s discuss terminology. The (not to scale) diagram in Figure #1 – produced by the Energy Information Administration (EIA) in July 2014 – illustrates terms used to categorize oil and natural gas resources based on certainty (more certain to the right, less certain to the left).  The total universe of hydrocarbon resources is represented by the outer oval (outlined by dashed line); the red-colored slice to the right represents what has been produced so far.

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