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By Robert Rapier on Oct 23, 2015 with 17 responses

Why the Bakken Boomed

A Williston Basin Primer

In my previous article Addressing the World’s Flare Gas Problem, I discussed my current project, which recently took me to the Williston Basin in North Dakota and Montana. Today, I will discuss the region’s shale oil boom in greater detail. In Part 3 of this series, I will conclude by delving into the economics of shale oil production.

The Williston Basin underlies parts of North and South Dakota, Montana, southern Saskatchewan, and southwestern Manitoba. Within the Williston Basin is the Bakken Formation, which first produced oil over 60 years ago. It was on North Dakota farmer Henry Bakken’s farm in 1953 that Amerada Petroleum — later acquired by Hess (NYSE: HES) — discovered oil at a depth of about 10,000 feet. The Bakken Formation is to date the source of most of North Dakota’s rapid oil production growth, but underneath the Bakken Formation is the Three Forks Formation, which has also begun to produce oil:

Bakken-MapSource: US Geological Survey

*AU = Assessment Unit and TPS = Total Petroleum System

There are billions of barrels of oil in the Bakken Formation, but the crude is trapped inside a fine-grained rock called shale. This shale is porous, which means it has tiny spaces that hold the oil and gas. But the permeability of the rock is very low. In other words, the rock holds a lot of oil, but it doesn’t flow out readily. Thus, 50 years after the discovery of oil in the Bakken, North Dakota was still a minor producer at less than 100,000 barrels per day.

That would change dramatically with the marriage of two technologies — which only became economical when oil prices began to escalate in 2005.

The Two Game Changers

The technique of hydraulic fracturing, or “fracking” had been around since the late 1940s and has been used extensively to promote higher production rates from oil and gas wells across traditional production regions like Texas and Oklahoma. Fracking involves pumping water, chemicals and a proppant down an oil or gas well under high pressure to break open channels (fractures) in the reservoir rock trapping the deposit. The proppant is a granular material like sand designed to hold those channels open, allowing the oil (or natural gas) to flow to the well bore.

Hydraulic fracturing rectified the permeability issue of shale. But there were wells being fracked in North Dakota in the 1950s. Why did it take another 50+ years before oil production took off in the state?

There are expenses involved in fracking a well, so the increase in oil production has to make the extra expense worthwhile. But the Bakken is only 100-150 feet thick. You might imagine that if it were thousands of feet thick you could frack many times at widely-spaced vertical intervals. However, that wouldn’t work in a formation that is under 150 feet thick. If the fractures are too close together you get diminishing returns. You don’t want the fractures from one stage to overlap another stage. So, a vertical well in the Bakken might only support a single frac stage, which would increase oil production but not dramatically so.

Like fracking, horizontal drilling was invented decades ago, and has been widely used in the oil and gas industry since the 1980s. As its name implies, horizontal drilling involves drilling down to an oil or gas deposit and then turning the drill horizontal to the formation to access more of the deposit. These horizontal “laterals” can be 5,000 to 10,000 feet in length. So now instead of a well being able to access maybe 130 feet of the Bakken Shale, a single well could access more than 50 times this distance. It was the combination of these two decades-old techniques — hydraulic fracturing and horizontal drilling — that inaugurated the U.S. shale boom.

151019TESbakkenlayers
Source: American Oil & Gas Historical Society

North Dakota’s oil production began to take off in 2008, with natural gas production not far behind. Today North Dakota is the 2nd largest oil producer in the U.S., behind only Texas:

151019TESndprod

Getting to Market

Logistically, it was a challenge to get this new oil and gas to market, since North Dakota wasn’t a major traditional oil producer. Because pipelines take years to construct, the early surge of production proved a boon to railroads. The rails already criss-crossed the area, and ramping up was simply a matter of adding the right kind of rail cars and loading terminals. In less than three years railroads including Berkshire Hathaway’s (NYSE: BRK-A) BNSF Railway increased crude shipments by over 700,000 bpd.

This year, however, the volume of oil being moved by rail has fallen by about 200,000 bpd. Some of this can be explained by flattening oil production as a result of the price crash, but the other major factor is that pipeline infrastructure is finally beginning to catch up. (Of course natural gas isn’t suitable for shipping in a rail car, so much of the associated gas production was flared as discussed in my previous article.)

151006MLPIIndrail
Source: North Dakota Pipeline Authority

Resources and Reserves

So how much oil are we really talking about? In 2013 the US Geological Survey (USGS) estimated that the Three Forks Formation contains an estimated mean resource of 3.73 billion barrels of oil and the Bakken contains another 3.65 billion barrels of oil for a total estimated resource of 7.4 billion barrels of undiscovered, technically recoverable oil in the two formations. The two formations were also estimated to contain a mean of 6.7 trillion cubic feet (tcf) of undiscovered, technically recoverable natural gas and 0.53 billion barrels of undiscovered, technically recoverable natural gas liquids (NGLs).

Of course “technically recoverable” is an estimate of what could be recovered with existing technology, and therefore vastly underestimates the amount of oil in place in the Williston Basin. Most of this oil isn’t recoverable with existing technology, but the total oil in place has been estimated to be as high as 500 billion barrels. The state of North Dakota estimated a more modest 167 billion barrels of oil in place, which is still far more than the amount that is technically recoverable.

But what is “technically recoverable” isn’t necessarily economically recoverable. To be classified as a proved reserve, oil or gas has to meet both qualifications at prevailing prices. In a December 2014 report, and based on oil prices still hovering around triple digits, the Energy Information Administration estimated that the proved oil reserves in the Williston Basin were 3.2 billion barrels. To put this in perspective, this is equal to just under 6 months of U.S. annual oil consumption which is presently about 7 billion barrels of oil per year.

What about Economics?

I started to include a section here on shale oil economics, but ultimately decided that this topic can stand alone in next article. There is a school of thought that shale oil isn’t economical, because the wells deplete too quickly. The truth is a lot more nuanced than this. I will get into this in the next article, and rank the region’s top producers.


Link to Original Article: Why the Bakken Boomed

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  1. By Forrest on October 27, 2015 at 8:22 am

    I enjoy reading and relating to the oil drilling industry, per my water well drilling experience per generational family business. Father’s low tech approach and nephews high tech. The northern part of Wisconsin was rated most difficult via glacier leftovers and most difficult with spudding drills. Modern rotary and air hammer technology, it’s a breeze. They utilize equipment much like oil industry on a much smaller scale. Hydro fracking, tricone bits, drill rod, casing, mud, pumps, air, cement packing, and just about all the rest. Unlike the oil water industry, they utilize down the hole air hammers and the most powerful rigs utilize casing instead of drill rod. They just leave the hollow casing bit behind or remove steel per plastic casement. That is the most popular option. They don’t angle drill. But, family members do that, as well, with the angle drilling operations for water or conduit lines.

    Michigan has been utilization fracking for oil production for decades. It went unnoticed by environmentalist per stellar environmental record. They got all excited per politics of hurting fossil fuel, until the recent unequivocal and throual environmental impact results that indicate their claims were false. They don’t care and held harmless for creating maximum delay and cost. Basic fear mongering to get desired results. I fear all the GW hype is similar fashioned as well as claims against nuclear, hydro, pipeline, ICE cars, and even modern coal power plants.

    Some of my nephews have joined up with the Bakken oil wealth. Extremely good income for high school grads with good thinking skills and hard work ethics. Williston has bad memories as just a few year ago lost my nephew their. Very young lad, that worked in the local hardware store. He teamed up with some friends from high school to get jobs and lived in trailer. Lots of partying and drugs. He got fed up with the mess and walked 20 miles to good friend employer whom helped him to hotel. He suffered heart attack, that night.

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    • By Forrest on October 28, 2015 at 8:27 am

      By the way the above was a long winded personal experience way of confirming in my mind how drilling technology evolves. One generation past drillers would be shocked to see what is possible nowadays. This is evidence that progress will continue at a rapid rate and that ocean exploration and deep hold drilling will achieve much. Probably the best defense of the future of deep well geothermal power, as well.

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  2. By Russ Finley on October 27, 2015 at 8:58 pm

    Interesting. Your chart shows that rail export volumes peaked at about 850,000 barrels
    per day. According to the EIA, we consumed 935,000 barrels per day of corn ethanol last year–every last drop shipped by rail and truck. I just received an email from the Sierra Club asking for my support to stop the shipment of oil by rail because its explosive and therefore dangerous. I’m guessing they’ve never seen an ethanol fire.

    http://blog.iem.com/wp-content/uploads/2012/07/Ohio-Train-Explosion.jpg

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    • By Forrest on October 28, 2015 at 8:23 am

      Not many have. The oil is so dangerous because the jiggling and jostling help the oil precipitate more explosive gas. Ethanol per fire and environmental harm is low. The new tanker regs propagated per the petrol fire deaths make ethanol even safer. It wasn’t the ethanol safety record that motivated regulators. But, isn’t this ironic that the high carbon cost and loss of life was due to the activities of Environmentalist. They pushed their political agenda per government leadership that lack concerns of informing or promotion of solutions to improve economy and environment, but just fan their constituency biases for votes. That’s shameful.

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      • By Forrest on November 7, 2015 at 7:49 am

        Roughly 10% of the nations crude is transported by rail and that percentage of crude is more volatile than the rest. North America rail accidents, spills, and deaths has ballooned in recent years due to the Environmentalist blocking keystone pipeline and need to transport the more flammable Balkan crude by rail. Authorities realize this sweet crude is more dangerous than originally thought. Also, they suspect the fracking chemical, hydrochloric acid, may be attacking integrity of tanker car. Reference Bloomberg August dissolved gas content and explosive fire danger of propane and ethane. Reference sightlline.org Eric de Place and Rich Feldman on politics of (crony capitalism) of tanker cars. Left sensitive Warren Buffet appears to enjoy special status at The White House, nowadays. Remember the brown nosing support of politics per his secretary’s income tax rate and Warren’s claim the rich didn’t pay enough taxes. Guess the ploy paid big dividends.
        Reid vapor testing of Balkan crude has been tested as high as 10-12 psi. This is close to gasoline danger. EPA summer blend of gasoline vapor pressure down to 9-7.8 psi. Ethanol runs 2 psi, so compared to Balkan crude or gasoline, not as dangerous. Reference Wall Street Journal “Balkan shale Oil carries high combustion risk”, Feb 23.
        One must acknowledge that crude oil chemical complexity and uncertain danger per explosion and fire hazard vs ethanol pure chemical consistency with accurate predictability to assay fire danger or explosion limit danger. Also, ethanol pollution upon combustion just about nil. Dilution is the solution to pollution in which ethanol has stellar performance upon waterways or just just squirting water. Tide laundry detergent utilizes a portion of ethanol to enhance cleaning performance. Food preparation, indoor heating, chafing dishes, hand wipes all have utilized ethanol per lack of harmful pollution other than CO2. By the way the public does actually consume the product and health professionals claim in moderation a health benefit. Of coarse maybe drinking gasoline or crude oil would improve health, also?

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    • By Alex Johnson on November 5, 2015 at 12:51 pm

      The ethanol is not as explosive as the light crude being shipped from the Bakken. As I understand it the oil is difficult to completely de-gas so light, explosive gasses collect in the headspace at the top of rail cars. In the event of a crash that gas is very very easy to ignite. Not many of the ethanol spills actually ignite. So many times an ethanol spill is cleaned up by simply diluting it and letting nature break it down. The possible side effects of oil spills from derailments is much much more severe.

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      • By Russ Finley on November 6, 2015 at 10:52 pm

        Could you provide the links to back that up so we will know that you didn’t just make it up ; ) ?

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        • By FederalFarmer on November 8, 2015 at 9:12 am

          I can’t make a comment on his claims about ethanol, except to say they sound reasonable. I can comment on the oil found in the Bakken and Three Forks. I’m a petroleum engineer who has done quite a bit of work in North Dakota. The oil there is very light and volatile. His comments about the oil are correct.

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        • By Alex Johnson on November 11, 2015 at 10:17 am

          I don’t remember the exact article I read about it in, but a quick google search yielded several articles quoting the same reasons for the explosions so I picked this one.

          http://insideclimatenews.org/news/20140305/oil-train-made-riskier-producers-deliberately-leaving-volatile-gases-crude-0

          Here is an article about a recent ethanol spill in the Mississippi, they simply allowed it to dilute out and degrade.

          http://www.startribune.com/more-than-18-000-gallons-of-ethanol-went-into-mississippi-after-train-derailment/343246062/

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          • By Russ Finley on November 11, 2015 at 9:52 pm

            Nothing in either link says that oil is more likely to burn than ethanol after a train accident. In one article it mentions a derailment where the ethanol caught fire and another derailment when the oil did not. It also mentioned a change in the design of ethanol cars to reduce the number of fires that were occurring. In any case, the Sierra club is just trying to frighten people into subscribing.

            Ethanol spills can also cause big fish kills:

            http://www.rockfordadvocate.com/canadian-national-settles-with-state-county-in-2009-ethanol-fish-kill-case-4991/

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            • By Alex Johnson on November 12, 2015 at 10:11 am

              No it mentioned that the lighter gasses separate out from the oil. I never said ethanol can’t light on fire, or that it didn’t cause any harm, its just much less likely and only locally toxic. It dilutes pretty quickly. If you want to see which ignites easier look up their flash points (the temp at which they give off vapor that can ignite). Lets assume propane, ethane, and methane are separating from the bakken oil. The flash points for each are; Methane: -306.4F, Ethane: -211F, Propane: -155F. Now ethanol has a flash point of 63F. So if its lower than 63 degrees outside ethanol won’t even vaporize on its own to allow ignition. However, those light gasses coming from the Bakken oil would ignite on the south pole in the dead of winter. So to recap, at all survivable temperatures the oil coming from the Bakken, if not completely degassed (which is exactly what my article was talking about) is more apt to ignite than ethanol. Do I need to explain it further?

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            • By TimC on November 12, 2015 at 12:40 pm

              “So if its lower than 63 degrees outside ethanol won’t even vaporize on its own to allow ignition.”

              Last February, a CP freight train derailed alongside the Mississippi river, north of Dubuque, Iowa. The river was frozen, and the ambient temperature was well below 63F, and yet several ethanol tanker cars ignited. So yes, I guess you do need to explain it further. Before you do, you might want to read up a little on the relationship between temperature and vapor pressure, and the true meaning of flash point temperature.

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            • By Alex Johnson on November 12, 2015 at 1:01 pm

              I realize the relationship, I was generalizing for the sake of brevity. The point is that the lighter gasses that off gas from the oil in those tankers is much more apt to ignite than ethanol given similar conditions. And there are a lot of conditions where the light gasses will ignite when ethanol will not. It does not change the overall point that ethanol tankers are less prone to fire during spills than the sweet crude from the Bakken.

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            • By Forrest on November 13, 2015 at 2:05 pm

              I think it’s worse than that. Balkan light crude is like gasoline with all the dissolved gases. They process the crude to remove these gases, but it’s not perfect. The tanker car should be rated for pressure vessel regs.

              Railroad car transport of crude has exponentially increased as the environmental risk and death rate. Rail traffic has increased 4,000% since 2008. The country citizens would be up in arms if ever they were properly informed of the danger. Media is to full of partisanship to out the inaction of CIC whom should be shamed or overridden with the pipeline construction. Can you imagine the hoopla from media and protesters if ever a Right wing CIC tried the stunt. It would be condemnation of blood for partisan politics, cronyism with favored donors, and environmental disaster accusations. All of it is true, by the way, just the Left is in charge and goes unchallenged by media and activist. That political machine is so powerful they can get away with just about anything. Look up the accident and environmental harm per railroad vs pipeline or even truck transport being the most dangerous. By the way I was shocked to read a single truck transports can carry more gallons of gasoline than a single railroad car. Who would have thought? Ethanol has very few pipelines for transport. As a result a gallon of ethanol should have a higher accident rate. It doesn’t. Haven’t read the stats, but the industry appears to be very proud of the record. More physical injuries climbing up and down tankers than fuel spill or fire. By the way if you are changing the fuel pump, best to run a tank of E85 beforehand and do the job in cool fall weather.

              This is a good read http://northernpublicradio.org/post/hard-look-risks-transporting-oil-rail-tanker-cars

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            • By Russ Finley on November 13, 2015 at 10:44 pm

              … ethanol tankers are less prone to fire during spills

              It’s a fair hypothesis. Show me the number of oil/ethanol tankers that have caught on fire per gallon shipped by rail, calculate the percent difference, and I’ll be convinced that one or the other catches on fire some percent more than the other (if your sample size is large enough). Obviously, some small percent of both chemicals end up catching on fire when train accidents occur. My original point was the Sierra Club cherry picked the oil fires but have never said anything about the ethanol fires, and they certainly did not do the above calculation first ; )

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            • By Forrest on November 16, 2015 at 7:44 am

              Did you expect Sierra Club to be honest or fair? Concerns of RR tanker fires didn’t occur until the 4,000% increase of crude oil tanker transport.

              Petrol industry advocates attempted to fear monger ethanol production upon RFS regulation back nearly a decade. They canards claimed ethanol is transported by dangerous rail instead of safe pipeline. Whoops , they don’t bring that point up anymore. Why is that? Also, they claimed ethanol is dangerous because fighting the fires is different than petrol. O.k? Just a stupid argument they present in an attempt to get some traction upon citizen concern.

              Info I’ve read say, stats that track biofuel accidents and fire not available. Not biofuel specific and not readily available. Chemistry of gasoline vs ethanol claim same spill size of fire more severe for gas per the physical properties, enthalpies of combustion, and emissions of the flame. Flash point of ethanol 55 vs gasoline -45. Autoignition of ethanol 793 vs gasoline 495. So, the chemistry suggest ethanol is more difficult to catch fire and once on fire less dangerous.

              The logistics favor ethanol and may be the largest factor. Feed stock of gasoline must be transported long distance to refinery and then finished product back to consumer. Path of transport bumps up against environmental sensitive areas and populous zones. Super tanker transport has very large potential for disaster as off shore drilling. Ethanol feed stock has extremely low risk to health and environment and transported short distances usually in rural areas. Most of it within 50 mile radius of processing plant. Modern cellulosic ethanol requires short supply route to lower cost. Since ethanol plants are less costly and smaller as compared to petrol refinery, they’re numerous and spread diverse upon land mass. They present less national terrorist risk, economic risk, supply risk, and lower finished product supply chain distance and ensuing risk. Petrol has a very efficient supply chain per the huge investment and long development time span. Ethanol has just started to improve the supply efficiency and have a long catch-up. The natural advantages of ethanol should make the job easier.

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            • By Forrest on November 16, 2015 at 8:14 am

              Also, kudos to U.S. petrol for establishing the world’s most efficient sector for transportation fuel. This has been a huge economic boost to U.S. economics and not the poison often iterated by foolish environmentalists that only visit like mind web sites. The U.S. sits on top of a very prolific, efficient, web of economic power for winning energy supplier. I’m not suggesting for a minute we pull the plug on such an advantage. We can, however, make the fuel supply last longer, utilize it more sparingly, and efficiently. I do think we should maximize ethanol fuel to make petrol’s job easier. We should quickly migrate to E15 base fuel and E30 super premium. New production cars with spark ignition should all be flex fuel capable. Ethanol optimized high torque engines should be quickly be introduced within the truck and auto fleet. We need to utilize ethanol at it optimum as well. EPA should simplify the certification and drop the costs. This indirect tax path for funding should not be tolerated by public. The VW debacle for emissions is just more proof on incompetence of the agency. We would be better served with simplified regulations, bottom line improvements, and real world feedback/inspections.

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