In fact, the Monterey is thought to hold over 400 billion
barrels of oil, according to the U.S. Geological Survey.
That's nearly half the conventional oil in all of Saudi
Arabia. The United States consumes about 19 million barrels of
oil a day.
"Four hundred billion barrels, that doesn't escape anyone
in this businesses," said Stephen Trammel, energy research
director at IHS Cambridge Energy Research Associates.
The trick now is getting it out.
As a result of the San Andres fault, California's geologic
layers are folded like an accordion rather than simply
stacked on top of each other like they are in other Shale
states. The folds have naturally cracked the shale rock, and
much of California's current "conventional" oil production
-- the third largest in the nation -- is thought to come
from the Monterey.
But the folds mean recent advancements that have made shale
oil and gas profitable to extract -- horizontal drilling
combined with
hydraulic
fracturing -- don't work as well in California. It's
hard to drill horizontally if the shale is not flat.
Plus, it appears the Monterey is made up of shale rock that
doesn't respond as well to hydraulic fracturing -- the
controversial practice known as fracking
that involves injecting water, sand and chemicals into the
ground under high pressure to crack the rock and allow the
oil and gas to flow.
Still, the U.S. Energy Information Agency estimates there
are over 15 billion barrels of oil that can be recovered
using today's technology.
"That's a huge number," said Matt Woodson, an analyst at
the energy research firm Wood Mackenzie. Woodson said the 15
billion number far exceeds current estimates for North
Dakota's Bakken Shale, and is about half the amount held in
Alaska's
North Slope before it was tapped.
That potential has attracted the attention of the oil
industry.
Several oil companies have put together research teams to
work on the Monterey, said Katie Potter, head of exploration
and production staffing at NES Global Talent, a company that
recruits oil industry professionals.
If the Monterey takes off, Potter said the impact on jobs
in the state would be huge, saying the shale
boom has already created 600,000 jobs nationwide over
the last few years.
"It could potentially solve the state's budget deficit,"
she said.
Last month, the government held a lease sale to drill in
the Monterey. While only a modest 18,000 acres were offered,
they were all snapped up.
Occidental (OXY,
Fortune
500), which is California-based and has long
held acres in the Monterey, has had some success using a
technology known as deep acid injection, said IHS's Trammel.
The process involves injecting hydrofluoric or other acids
deep underground, where they eat away at the shale rock and
allow the oil to flow. It's cheaper than fracking,
said Trammel. And while it sounds ominous, it may not be as
controversial, as the volumes involved are far less and it's
not done under such pressure, he said.
Still, no matter how the oil is produced, environmentalists
in the Golden State are keeping close watch.
Fracking could still become an issue, as it has in other
states where it's led to fears over groundwater
contamination, said Nathan Matthews, a Sierra Club
attorney based in San Francisco. And there's no guarantee
acid injection is much better.
Plus, there's air pollution, road congestion and other
issues that go along with an oil boom.
Matthews wants California regulators to require full
disclosure of everything the oil industry is putting in the
ground, as well as individual permits issued for each well
drilled.
"There's a chance to get this done much better than where
it's been done elsewhere," said Matthews. "We need to
understand the risks before we open the flood gate."
Regulations or not, there's still no guarantee there will
be an oil boom at all.
"It might not live up to its expectations," said Fadel
Gheit, a senior energy analyst at Oppenheimer. "The industry
has not concluded whether it's boom or bust."
But given the rapid advances over the last few years in oil
drilling and producing technology, the smart money may
be on boom.
"There are some pretty creative people in this industry,"
said Trammel. "I'd say they are going to figure it out."
