California’s Monterey shale is a dynamo among oil resource plays. Already, the Miocene formation ranks as the largest U.S. oil-shale play, said Tim Marquez, founder, chairman and chief executive of Venoco Inc., speaking at Hart Energy Publishing’s Developing Unconventional Oil (DUO) conference in Denver. Furthermore, unlike other oil resource plays, the Monterey has produced commercial volumes of oil for decades, Marquez noted.

Venoco is a pure California company, and it has major programs under way in the shale, both offshore and onshore.

The offshore Monterey is truly awesome. Currently, Venoco operates three offshore platforms and has interests in three more. All are in the Santa Barbara Channel; production is from the Monterey and other conventional zones. Venoco’s South Ellwood Field has already made 56 million barrels of oil equivalent (BOE) from the Monterey, of an estimated 76 million BOE in ultimate recovery from the shale. Total EUR from the field for all reservoirs is 94 million BOE.

Offshore, the Monterey reservoir is extensively fractured and produces on structural features. Traditionally, offshore Monterey wells have been perforated and acidized but not fractured with proppants.

This year, Venoco is focusing on recompletion projects at its offshore Monterey assets. It is interested in application of hydraulic-fracturing technologies to existing wells, and dual completions with other reservoirs.

Nonetheless, the buzz in the Monterey centers on its onshore potential. This year, Venoco will spend $48 million on exploration and exploitation in the onshore Monterey. It will drill at least 10 wells in the shale, acquire 3-D seismic and continue lease acquisition. Next year, it will ramp up drilling to between 30 and 50 wells.

Venoco started work in the onshore Monterey in 2006. “The offshore has had fairly extensive exploration and development, but surprisingly, very little exploration has been done onshore,” said Marquez.

The company now holds 105,000 undeveloped acres in the onshore play and 50,000 held-by-production acres. Two main areas of interest are the Salinas and San Joaquin valleys. “We are delineating and optimizing in all Monterey basins,” he said. “On Venoco’s leases, we have over 10 billion barrels of oil in place.”

A marked feature of the Monterey is its high variability. It varies strikingly across its extent, with lithologies and diagenetic and tectonic histories each having considerable impact on its reservoir properties and trapping styles. Some Monterey fields are stratigraphic and others are diagenetic or structural traps; the complexity creates many opportunities. It also makes the Monterey particularly challenging.

Venoco drilled three onshore Monterey wells in first-quarter 2010; its last vertical well logged 1,500 feet of net prospective pay. “We have a discovery in the testing phase,” said Marquez. “We’re very confident we have a very nice play on our hands.”

Western Energy Production LLC, a privately held California-based E&P, is also active in the onshore Monterey. It holds some 30,000 net acres in the play in Kern County, said managing director Steven Marshall, also speaking at the DUO conference.

Remarkably, for such a powerhouse producing state, California can be considered lightly explored, he said. “Common knowledge has generally impeded deeper drilling.”

Western sees the strong production history of the Monterey shale as a guide to its future. Numerous fields in the southern San Joaquin Basin produce from Monterey, including Lost Hills, Belridge, Rose, North Shafter and Elk Hills. Marshall estimated Monterey shale production at some 75,000 BOE per day from the San Joaquin alone.

Western has focused its shale efforts on the eastern flank of the basin, between Lost Hills and Rose and North Shafter fields. It likes the area because the shale there is quite siliceous and underexplored, as most drilling has focused on the Stevens and underlying sands.

“We continue to grow our acreage as the play evolves,” said Marshall. The company is now transitioning from land acquisition to exploration and drilling, and it is currently looking at joint-venture and partnering opportunities.

“This play needs competition,” he said. “It’s been landlocked for a long time, and a lot of people didn’t have their exploration hats on.”