Monterey Shale - Monterey Shale Map - California Oil & Natural Gas

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Monterey Shale - Monterey Shale Map - California Oil & Natural Gas Formation

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The Monterey Shale is a rib-shaped formation that extends from northern California down to the Los Angeles area, offshore, and onto the outlying islands.  The Monterey Shale Formation is currently producing oil & natural gas and is an emerging shale play.   Counties include Kern County, Orange County, Ventura County, Monterey County and Santa Barbara County, California.  The Monterey Shale is composed of a concoction of many substances including folded mud deposits and highly dense chert (Chert is a compact rock consisting essentially of microcrystalline quartz. It is extremely hard and very difficult to drill.)  The Venoco CEO stated their might be up to 300 billion barrels of oil in the Monterey Shale but their first well was labeled " uneconomical.".  The Monterey Shale, while it consists of both oil and gas, is primarily oil.  Extraction is focused mainly from vertical drilling techniques versus the costly horizontal technique used for most shale gas plays.   Natural Gas estimates in the Monterey Shale stop at between 1.5-2.0 trillion cubic feet.

History - Monterey Shale has been extracted since the end of the 19th century, however; in small volume.  Companies were not as focused on it throughout the years due to the low recovery rate.  Nonetheless, in 1999-2000, a new technique consisting of large-volume hydrofluoric acid jobs was tested on horizontal Shale wells which proved to increase the flow volume of the wells by a considerable amount.  Vertical Shale wells were then acidified using the same method which increased the average well production by 110 barrels of oil per day.  This method also decreased the costs of extracting the oil to around $10/barrel. With crude oil going for around $80 a barrel, the Monterey Shale became profitable.   

The Monterey Shale is located in the San Joaquin Basin which is home to the Kern County oil discovery.  The San Joaquin Basin extends up to Kern County, Kings County, Tulare County, Fresno County, Madera County, Merced County, Stanislaus County, San Joaquin County.   The Monterey Shale is also known as the Miocene Monterey Formation. 

From the USGS:  Potential reserve growth in existing oil and gas fields in the San Joaquin Basin Province was calculated during our study. Based on the analyses of recovery efficiencies and remaining oil-in-place, we estimated that another 3.5 billion barrels of oil may be added to reserves in existing fields. Most additional reserves may come from improved recovery in diatomite reservoirs of the Miocene Monterey Formation. This estimate of potential reserve growth suggests that most oil in the future may come from existing fields rather than from new oil field discoveries in the San Joaquin Basin.

Monterey Shale Map
monterey shale
Monterey Shale Formation Map - USGS

Companies Drilling in the Monterey Shale  - Monterey Shale Stocks

Venoco Inc. (VQ) is a company with one of the largest stakes in the Monterey Shale.  Venoco currently over 300,000 acres in the Monterey Shale under lease and has over 10 billion barrels of oil available for extraction at its current sites.   

VQ 2011 Update - The company spent $34 million or 50% of its second quarter capital expenditures on projects targeting the onshore Monterey shale formation. The company spud two wells during the quarter and set casing on five wells that were spud earlier in the year. During the first half of the year the company spud seven wells and set casing on eight wells (including wells spud during 2010). The company expects to drill three to four additional delineation wells in its Sevier discovery during the second half of the year. The company also continues to expand its onshore Monterey acreage position which is currently approximately 304,000 gross and 214,000 net acres across three basins: Santa Maria, Salinas Valley, and San Joaquin (which includes the Sevier discovery). Of these totals, approximately 60,000 gross and 46,000 net acres with Monterey shale production or potential are held by production.
The company is currently operating one rig in its Monterey shale play and is working to identify and secure up to four additional rigs by year-end 2011. The increase in rigs would be in anticipation of much greater activity in 2012 when the company currently expects it may run six to eight rigs in the play and spud between 50 and 75 primarily vertical wells, as warranted by drilling and production results. 2012 drilling activity will be focused on delineation and development wells in the company's Sevier discovery, in the area covered by the company's joint 3-D seismic shoot (with Occidental Petroleum) in the San Joaquin Valley and, after completion of an anticipated 3-D seismic survey, in the Salinas Valley.

"We are shoring up our development plans for the Sevier discovery and have been in contact with the agencies to ensure we have a clear path forward to develop this discovery. We currently expect to drill 30 to 40 wells there next year," said Mr. Marquez.

"We were pleased to see the recent U.S. Energy Information Administration's assessment of emerging resource plays, which confirms a lot of what we've been saying about the Monterey's resource potential. Not only is the Monterey shale the largest overall play, it also dwarfs all other individual U.S. oil shale plays. According to the EIA, at 15.4 billion barrels the Monterey shale represents 64% of the technically recoverable shale oil resources in the lower 48 states," commented Mr. Marquez.

"While to date we have not seen significant cumulative production as a result of our drilling in the onshore Monterey, we have been encouraged by the scientific information collected thus far. After extensive logging, coring and testing we have accumulated sufficient data from our vertical wells to announce discoveries in our Sevier prospect in Kern County and in our Salinas Valley prospect," said Mr. Marquez. "We believe the resource potential in Sevier is approximately 90 MMBOE on 20-acre spacing and approximately 44 MMBOE on 40-acre spacing in the Salinas Valley."

Occidental Petroleum Corp. (OXY) is another key player involved in the Monterey Shale. The company currently has over 1.2 million acres in the Monterey Shale (located mostly in Kern County, California) and plans to spend $6.3 billion developing the acreage over the next four years.   

Canadian Natural Resources Limited (CNQ) is an Independent Oil and Gas Company engaging in the exploration, development, and production of crude oil.  They currently hold over 70,000 acres of prime shale gas land in the Monterey shale.     

Plains Exploration & Production PXPWell, we haven’t done the operations onshore in the Monterey Shale. Our strategy there, if you recall, is to wait till the operators. They were doing a lot of work there. Venoco being number one. I think it has five or seven wells they are going to drill and take a very scientific approach and try some horizontals and so forth. We have our 100,000 acres or 86,000 acres there. So we’re waiting for the big announcement for us to get busy. Lately, the announcements were a little muddy at best. So we’re in a wait-and-see mode there. I think Oxy is doing the same thing. They may do a little more technical work, but they have got a couple million acres.

So, as long as other people are spending their money on and trying to make it commercial, we’ll sit and watch that. We’ll focus on our own business. We are shooting a 3D in the San Joaquin Valley with all the major leasehold owners out there, Aera, Chevron and so forth. So we’re doing some deep work to work on other zones, but those are more – that would be more a continuation of what Oxy had success on, some of the deep wall traps and some of the Miocene sand and some imaging deals to show additional productive deal. Obviously, we’ll drill the Monterey on the way down and if it’s prospective, we’ll look at it. But it’s way too early for us to be making a call that something we wanted to put a lot of capital in.

Plains Exploration PXP 2011 Update - In our core California asset area, Platform Irene is shut-in for planned maintenance. The work began mid-January and is expected to be completed by the end of the first-quarter 2011. Onshore California, PXP continues its active development program in the Los Angeles and San Joaquin Basins. With a large resource inventory identified for this asset area, it will sustain multi-year drilling programs providing future reserves, production and free cash flow. California is PXP's largest asset area with approximately 211 million BOE of proved reserves at year-end 2010 of which over 95% is oil. PXP maintained average daily sales volumes of approximately 40,000 BOE per day throughout 2010 and expects a 3% to 5% sales volume increase during 2011.

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