When in 2013 a study released by the University of Southern California claimed that the Monterey Shale was a gold mine for the U.S. oil and gas industry, with reserves of 13.7 billion barrels of oil potentially recoverable, fracking operators were delighted. However, their hopes are likely to be severely dented by the latest evaluation by the U.S. Energy Information Administration (EIA) which reduced those estimates by a staggering 96 percent, stating that the amount of recoverable oil in the Monterey Sale was about 600 million barrels.

The estimate is due to be officially released next month, but the news was announced by EIA Administrator Adam Sieminski at last week's Financial Times and Energy Intelligence Oil & Gas Summit in New York. Many experts believe this could be a heavy blow to the burgeoning industry that had projected 2.8 million new jobs and an extra $24.6 billion annually in tax revenue, based on the previous estimates, the Los Angeles Times reported.

The main reason behind the huge downward revision of estimates, according to the EIA, is the fact that authors of the assessment wrongly assumed that oil from the Monterey Shale could be as easily recoverable as oil in other shale plays across the country. However this is not the case, due to the specific geology of the Californian shale formation. Unlike the Bakken Shale and the Eagle Ford Shale, which are layered like a cake, the Monterey Shale is folded because of heavy seismic activity and the oil lies much deeper, the EIA explained.