A rather astonishing thing happened about a week ago. It was undoubtedly one of the biggest stories of the year, and it has implications for the United States for years to come.
Yet, you may have completely missed this stunning news.
The U.S. Energy Information Administration slashed by 96% the estimated amount of recoverable oil buried in California's vast Monterey Shale deposits.
Why is this such big news?
The Monterey Shale formation, a 1,750 square-mile area, contains about two-thirds of the nation's shale oil reserves.
In other words, nearly two-thirds of the US shale oil that was previously believed to be recoverable is not. A 96% reduction is a virtual wipeout.
The Monterey formation was previously believed to contain more than double the amount of oil estimated at the Bakken shale in North Dakota, and five times as much as the Eagle Ford shale in South Texas.
But — POOF! — just like that, the contention that shale oil would generate US energy independence, and lead us to surpass Saudi Arabia in production, went up in smoke.
Only 600 million barrels of oil can be extracted with existing technology from this vast stretch of Central and Southern California, far below the 13.7 billion barrels once thought to be recoverable.
To put that into perspective, at current usage levels, 600 million barrels would meet US oil demand for just 33 days. Yes, you read that correctly.
The energy agency said the earlier estimate of recoverable oil, issued in 2011 by an independent firm under contract with the government, broadly assumed that deposits in the Monterey Shale formation were as easily recoverable as those found in shale formations elsewhere.
Apparently, they are not.
Oil driller Occidental, which owns most of leases in the Monterey Shale, earlier this year put its California business up for sale in part due to lagging oil production.
Fracking — the process of injecting millions of gallons of water laced with sand and chemicals deep underground to crack shale formations — has not been productive in the area, which runs down the center of California roughly from Sacramento to the Los Angeles basin and includes some coastal regions.
This is a stunning reversal, and it's a reminder of that old adage: Don't count your chickens before they hatch.
It was previously believed that an oil boom would bring millions of new jobs to California and boost tax revenue by tens of billions annually.
All of those rosy projections were wiped out the instant this news was announced on May 21.
It's hard to overstate what an enormous blow this is to US energy interests.
For California, in particular, this is a huge setback for the economy and for anticipated tax revenues.
In 2013, a USC analysis, funded in part by the Western States Petroleum Association, predicted that the Monterey Shale formation could, by 2020, boost California's gross domestic product by 14%, add $24.6 billion per year in tax revenue, and generate 2.8 million new jobs.
The fact that none of this is true is a kick in the gut to the Golden State. And it could lead to a national oil shock in the coming years that would be devastating to the US economy and our way of life.
If we're ever going to develop energy independence, it will have to come from other means. The shale oil "revolution" was a myth from the beginning, and one that has quickly gone bust.
Perhaps this news will compel California to instead focus more on developing and advancing renewable energy.
That would provide a happy ending to this truly remarkable story.
No comments:
Post a Comment