A federal revision of the estimated reserves in the Monterey shale oil and gas formation in California is small compared with previous studies, the USGS said.

The U.S. Geological Survey found the Monterey shale, which lies within the broader San Joaquin basins, contains an estimated 21 million barrels of oil and 27 billion cubic feet of natural gas as technically recoverable reserves.

"The volume estimated in the new study is small, compared to previous USGS estimates of conventionally trapped recoverable oil in the Monterey formation in the San Joaquin basin," USGS said in a statement.

In terms of oil alone, the USGS in 2003 estimated Monterey shale held an average 121 million barrels of oil.

USGS concluded most of the oil in the California shale bed seeps out of the basins because of poor retention and natural processes.

California, despite a steady 30-year decline in output, ranks third in the nation in terms of crude oil production, behind Texas and North Dakota, respectively. Its 544,000 barrels of oil per day in July accounted for roughly 5 percent of total U.S. oil production, data from the U.S. Energy Information Administration show.

"Understanding our domestic oil and gas resource potential is important for many reasons, including helping policy makers to make informed decisions about energy policy, leasing of federal lands, and impact on other resources such as water," USGS program coordinator Vito Nuccio said in a statement.