December 21, 2012

Texas to lose its oil perch?

Fracking has expanded production in the Permian Basin, and gone on to open the Eagle Ford play for oil as well as gas. That, combined with the decline of the North Slope in Alaska, moved Texas back into the No. 1 slot among oil states a few years back.

But, the same modern techniques may make that perch short-lived. And, no, it's not North Dakota that's threatening.

Instead, the Golden State may be the new kingpin for black gold.

A shale play near Monterey, Calif., could have double the reserves of Eagle Ford plus North Dakota's Bakken combined.

Of course, as the story notes, Californai has strong environmental  laws. How much that will affect Monterey production, I don't know.

But, with California's population and refineries, you know oil companies are just itching to get at this.

At the same time, this has to be another concern for global warming issues. It certainly means that oil prices won't go so high as to discourage too much SUV use in the US, or the growth of car ownership in China and India.

Adjusting for inflation, if the Monterey play starts development any time soon, I'd say oil will stay below $110/bbl for the rest of the decade.

But, that's a big if. The Center for Biological Diversity has already annouced plans to sue. That area is also the home of wine grapes, strawberries, Gilroy-area garlic, and more. That alone will slow development.

And, it's also the home of earthquakes. Given that fracking already seems pretty well connected to some small earthquakes, fracking in close proximity to the San Andreas Fault sounds scary as hell. It also will be challenging, I'm sure.

Also, even if this bonanza leads us to meeting all our oil needs domestically, that still doesn't insulate the US from world oil issues.

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