NEW YORK, May 21 (Reuters) - The U.S. Energy Information Administration (EIA) on Wednesday cut its estimate of recoverable oil in California's Monterey shale by 96 percent, casting doubt on what was once thought to be America's next major energy play.
In what could be welcome news for environmentalists and a potentially bad omen for oil drillers, such as Venoco Inc, with large leases in the region, the EIA slashed its forecast of technically recoverable reserves, citing production difficulties from initial wells.
The reserves were downgraded by 96 percent, from 13.7 billion barrels estimated by a government-funded report in 2011, to just 600 million barrels, the EIA said. A detailed report is expected to be released next month.
"The EIA concluded that the technical recoverability of Monterey shale did not look as strong in 2014 because of the industry's difficulty in producing from the region," EIA head Adam Sieminski told reporters in New York.
Technically recoverable reserves are often a moving target, changing as new drilling techniques develop and the price of oil fluctuates. Further drilling will likely provide clearer evidence of the Monterey's true reserves, the EIA said.
Horizontal drilling and hydraulic fracturing, or fracking, which involves cracking open shale rock using water, sand and chemicals, has unlocked vast amounts of oil and gas in recent years from other shale plays like the Bakken in North Dakota and the Marcellus centered in Pennsylvania, transforming the estimated amount of recoverable oil over the last decade.
But fracking alone has failed to produce the same results in the geology of the Monterey shale in central California, dampening expectations for a resource once thought to rival other giant U.S. shale deposits and seen as an economic boon for the state. Some drillers have turned to other methods, including using acid to help melt rock, though progress has been slow and met with strong environmental opposition.
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