Wednesday, April 09, 2008

North Dakota Discovery - 200 Bn Bbl Of Oil

Two hundred billion barrels of oil have been discovered in North Dakota.

America is sitting on top of a super massive 200 billion barrel Oil Field that could potentially make America Energy Independent and until now has largely gone unnoticed. Thanks to new technology the Bakken Formation in North Dakota could boost America’s Oil reserves by an incredible 10 times, giving western economies the trump card against OPEC’s short squeeze on oil supply and making Iranian and Venezuelan threats of disrupted supply irrelevant.

In the next 30 days the USGS (U.S. Geological Survey) will release a new report giving an accurate resource assessment of the Bakken Oil Formation that covers North Dakota and portions of South Dakota and Montana. With new horizontal drilling technology it is believed that from 175 to 500 billion barrels of recoverable oil are held in this 200,000 square mile reserve that was initially discovered in 1951. The USGS did an initial study back in 1999 that estimated 400 billion recoverable barrels were present but with prices bottoming out at $10 a barrel back then the report was dismissed because of the higher cost of horizontal drilling techniques that would be needed, estimated at $20-$40 a barrel.
Business Week confirms the report.
A long-awaited federal report on oil that could be recovered in parts of North Dakota, Montana and two Canadian provinces is to be released this week.

The Bakken shale formation encompasses some 25,000 square miles in North Dakota, Montana, Saskatchewan and Manitoba. About two-thirds of the acreage is in western North Dakota, where the oil is trapped in a thin layer of dense rock nearly two miles beneath the surface.

Ron Ness, president of the North Dakota Petroleum Council, said the number of wells in the Bakken increased from about 300 in 2006 to 457 at the end of last year. Bismarck-based MDU Resources Group Inc. announced its first venture into the Bakken this week.

The study being released Thursday by the U.S. Geological Survey was done at the request of Sen. Byron Dorgan, D-N.D., over the past 18 months.

"Technology continues to advance," Dorgan said Monday. "This is not going to be a red light or green light about oil development in the Bakken -- clearly there already is a big green light there. But I think the question is pretty clear: How much of that oil is recoverable using today's technology?"
The First report was a quote from New Energy which often gets things wrong. I'd say the Business Week Report is more reliable.

Here is a technique for Mining Oil. I think the peak oil folks got it wrong. As usual. Capitalism beats the fear mongers. Again.

H/T Paper Tiger in the comments at Classical Values.

Cross Posted at Classical Values


Anonymous said...

The story is an Associated Press story. It was not done by Business Week. It is simply posted on the Business Week site.

The statement that this is a new oil discovery that has gone largely unnoticed is wrong. There's been plenty of coverage in the last few years about oil production in the Bakken play, which really got going in far eastern Montana and has now spread to North Dakota. The question is, how much oil is there that's recoverable using current technologies? That is what the U.S. Geological Survey report is about.

One other thing to note -- it's expensive to produce oil from the Bakken. Drilling a well is costing $6 million to $8 million or more. To sustain the Bakken play will require oil prices above $60 a barrel or more.

M. Simon said...

You are correct in all your points.

Let me add one of my own.

The amount of oil there would put a cap on oil prices and help buffer the market. Not a small benefit.

The fact that there are already about 450 wells in the region is a good start and proves the technology works.

So this is not some pie in the sky by and by type hype.

The USGS will give us some clue as to how much more we can do in terms of wells and total recoverable reserves.

Eric said...

If what I read in the Philadelphia Inquirer is any indication, yes it has gone unnnoticed.

Great work!

Joseph Sixpack said...

I think the most important question is how much uninhabited tundra do we damage if we extract this oil? We cannot risk development of uninhabited tundra and the resultant negligible environmental impact for a mere 20 billion barrels of oil.

M. Simon said...

North Dakota Tundra?

Got a link.

Basically we eat oil converted to food.

So what is your new slogan?

Starve the People, Save the Tundra

How humanitarian. Well at least the poor will be the first to go. Great!

M. Simon said...

BTW Joe, I had to read it a second time to get the full meaning.

Ya had me there for a while.

Way to go!

Caleb said...

How is this different from the oil shale reserves in UT, CO, and WY?

M. Simon said...

It comes out as liquid. No processing required.

linearthinker said...

Look for boom times among the prairie dog wildlife biologists and dakotan tundra ecologist community, who've heretofore been a starving minority among their peers. We'll no doubt be advised that it also dooms the Ogallala aquifer, threatening the Kansas wheat harvests, as well as driving the jackalope into extinction. So much science to do, so little time.

kurt9 said...

The reason why oil is currently at $110 per barrel is not because the price of oil has gone up, but rather the US dollar has gone down relative to the other currencies. The FED is pursuing an inflationary monetary policy in order to bail out the financial and housing industries.

In terms of PPP, the dollar is undervalued by 30-40% relative to the other currencies. Sooner or later (I think 2009) it will go back up relative to the other currencies and the price of oil will return to the $60 per barrel range.

The real price of oil in 2005 dollars is in the $60-70 dollar range. This means that tapping the Bakken oil fields would be marginally profitable. Given how badly the oil industry suffered as a result of the crash in oil prices in the early to mid 80's, the oil industry will not invest the capital to tap these fields unless they are sure that oil will remain above $70 per barrel for the foreseeable future. Remember, the oil industry hasn't hired anyone for 25 years. Its staffed with hard men in their 50's and 60's who remember the last crash and who are determined to avoid the next one.

kurt9 said...

Bets on ever increasing energy prices have tended to go very wrong.

1) Seattle First Bank (Seafirst) nearly went under and had to be bought out by Bank of America in 1984, because they invested heavily in the "participation loans" that Penn Square bank sold all over the U.S. in order to finance lots of oil exploration and recovery.

2) There was this wiz-kid who was the youngest person to take a company public in 1981. I forget his name, but he was 21 and his company financed oil and gas ventures. He believed that the price of oil was destined for $75 per barrel by 1985. His company was delisted when it went into bankruptcy in 1984.

3) McDonald Douglas designed and manufactured the MD-11 airline which, among other things, was more fuel efficient that the 747-400, which came out the same year, believing that the price of aviation fuel would go up. It went down instead. McDonald Douglas is no longer with us today.

The above three examples are some recent corporate history with regards to oil and energy prices in general.

Unknown said...

Petrobank quotes $1.7 million for drilling and completion. Many payback periods are 3-11 months.

The economics are attractive in the Bakken play. At least four wells per section can be drilled [per square mile]. Drilling and completion costs are approximately $1.7 million per well, and according to our independent reserve evaluator, proved plus probable reserves are 100,000 barrels of oil per well, representing less than 10 percent recovery of original oil-in-place, are well below our internal estimates of well potential. This leaves considerable upside potential for improved recoveries.

My main article on bakken oil

From the Bakken right now roughly
Montana 50,000+ bopd
Saskatchwean 30,000+ bopd
N Dakota 15,000+ bopd

Drilling continues to ramp up.

Something that will slow things down for the next five years is building the pipelines and refineries. Saskatchewan has been moving faster than N Dakota.

Papa Ray said...

The "Oil Companies" will invest (more than they already have) in this field. They know that the dollar will remain low for a couple of years, but the main reason is that they know that even when the dollar goes back up the ME Oil prices will climb right along with it.

I just have to comment on this:

"Remember, the oil industry hasn't hired anyone for 25 years. Its staffed with hard men in their 50's and 60's who remember the last crash and who are determined to avoid the next one."

Your right when you talk about the execs in the industry, and all of the retired geologists and engineers who were dragged out of retirement to staff positions that our universities couldn't train people fast enough. Besides who wants a cherry geologist or engineer calling the shots on holes that cost millions.

Other positions in the oil industry...well, they can't find enough people to fill them. Even hiring illegals and idiots they still are begging for oil field workers.

I should know, I live right in the middle of oil country, and have for fifty years.

The oil industry will be strong for at least the next ten to fifteen years, mainly because the idiots among us won't let us develop new (or old) methods of supplying the energy the world needs.

Papa Ray
West Texas

Boyd said...

Back in the late '90's when gold was at $255/oz the mine manager at Barrick's Betze pit in NE Nevada came in to a meeting with us ore truck drivers and indicated we should be looking for other jobs. His quote to us that, "it ain't ore if you can't mine it at a profit" made an obvious point and is THE operating principal of mining. At that time there was not much 'ore' left to be mined. The flip side of this is, of course, that with gold at $900/oz you can't kick over a rock without turning up more ore.

To miners, oil is just another product that is mined and it reacts to prices in just the same way. $110 a barrel oil in a real sense creates more oil. And the big boys are lining up to go after it.

And that is just the Bakken. Go across I80 and try and get a motel room without a reservation anywhere in Wyoming. Drillers and rigs by the hundreds.

Peak Oil? Please.

LarryD said...

USGS estimate comes out way lower than the talk.

only 3.65 billion barrels of oil, 1.85 trillion cubic feet of associated/dissolved natural gas, and 148 million barrels of natural gas liquids.


Unknown said...

The USGS projection is keeping pace with what is happening now. The technology and the business effort has to and I believe will increase to find ways to get more of what is there.

Just like eventually the shale in colorado should be tapped with underground heating. The Bakken oil in shale sandwhich should be easier to access than the colorado shale sans oil. When that happens then there will be new USGS reports to reflect that proven development.

M. Simon said...

How much gold is in a gold mine?

Could be none. It could be a lot. Depends on the technology and the price.

Thanks BW.

D Taylor said...

I feel that the United States needs to sever it's dependancy on foreign oil. This may very well be a large step in that direction if we can keep the environmentalists out of it. Gauranteed - they will find some obscure plant or animal to protect in that region and try to shut the whole thing down.