The Exploration potential of the Monterey Shale is apparently overwhelming the State office in California which oversees permitting. As we saw in the Bakken in North Dakota, when permitting rates increase, new employees need to be hired and trained to keep up with the pace. In this editorial by Michael Rubio, he outlines the necessity for regulators to step up to the plate and make the red tap easier to navigate.
Due to the backlog of permits, mostly due to the influx of operators wishing to explore the Monterey Shale, the Governor fired two high ranking officials at the Division of Oil and Gas. This signal may mean that the State is ready for new revenue sources, even it means incremental revenues from unconventional oil and gas production. With California’s Kern County housing one of the largest legacy oilfields in the United States, the trillion barrel potential in horizontally drilling and hydraulically fracturing the source rock may put California in first place for oil production in the future.
As an aside, it is interesting to note that previously declining legacy oilfield production has made refineries look for new sources of Crude. For instance, Tesoro is making a venue for new crude by building a rail receiving terminal due to the decline in Alaska’s conventional production. Conversely, Kern Oil Refining was rumored to have looked at building a rail receiving terminal near Bakersfield. Based on the new technologies, there still may be many more billions of barrels to recover from these legacy fields and the rush to build new crude terminals may not be needed in the long run. However, even though that line of thinking is logical, there is so much money to be made in the oil industry that even if the rail terminals are built, they would most likely be paid off in a matter of 1 to 2 years.