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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--"How high?" and "How fast?" were the two most-asked questions regarding crude-oil production trends in the Bakken formation at an Oil & Gas conference early last week in Bismarck, North Dakota.
North Dakota crude oil production averaged 821,598 barrels per day (BBL/d) in June, which was the most recent data available when Information Forecast Incorporated (Infocast) (Woodland Hills, California) held its Fourth Annual Bakken Infrastructure Finance & Development Conference. Shortly after the conference ended, the North Dakota Industrial Commission reported the state's crude oil production surged more than 50,000 BBL/d during July, to 874,460 BBL/d.
North Dakota's crude-oil production "has more than tripled over the last three years--a terrific performance," said Jeff Spearman, vice president for oil, gas and chemicals at SAIC Energy, a unit of SAIC Incorporated (NYSE:SAI) (McLean, Virginia). Production "will at least double over the next 10 years," he predicted. "If you think it's good now, going forward the opportunities will be absolutely terrific. Production will steadily get better."
Spearman's confident view was echoed by another conference speaker, Peter Hill, executive chairman of Triangle Petroleum Corporation (NYSE:TPLM) (Denver, Colorado). "We're still very early in the Bakken, but we know it is a massive oil field of unprecedented magnitude." He said the recent revised estimate of North Dakota's crude oil reserves, prepared by the U.S. Geological Survey (USGS) (Reston, Virginia), is far too conservative. That estimate, made earlier this summer, pegged North Dakota's undiscovered and technically recoverable oil resource at 7.4 billion barrels. Hill said that estimate "is bloody wrong and very short. You should ignore it."
Instead, Hill recommended crude-oil producers and service companies focus on last year's estimate of crude oil in the Bakken and Three Forks formations, prepared by Continental Resources Incorporated (NYSE:CLR) (Oklahoma City, Oklahoma). Continental was one of the first drillers to identify, measure and exploit the Bakken, and Hill said Continental's estimate was more credible than the USGS's.
A continentally estimated 903 billion barrels of oil were in place in the Bakken and Three Forks formations in North Dakota. At a standard recovery rate of 3.5%, that means there are about 32 billion barrels of oil that could be recovered, Hill said. And if recovery rates improved with gains in hydraulic fracturing, that could sizably increase the amount of oil recovered from those formations, he added.
Hill and another speaker, Eric Schaeffer, manager of business development for Enbridge Pipelines (North Dakota), a unit of Enbridge Incorporated (NYSE:ENB) (Toronto, Ontario), differed over how far and how fast crude oil production would grow in North Dakota. Citing estimates from the North Dakota Industrial Commission, Hill said production could double by 2017, to 1.6 million BBL/d, if there are 225-250 rigs drilling in the state. Enbridge's Schaeffer said that he thinks a doubling in production will not take place until 2022, under the best conditions. No one said that production had peaked.
Hill acknowledged that when crude-oil prices are high and production is growing, some might be inclined to pay less attention to drilling or operating costs, corporate debt, land acquisition costs, gas flaring or water issues. He cautioned attendees at the Infocast conference to run a tight ship and pay attention to operating and financial details, because oil is a dynamic global commodity. Crude oil prices could drop. Political sentiment could turn against operators. Oil giants like ExxonMobil (NYSE:XOM) (Irving, Texas) or BP plc (NYSE:BP) (London, England) could decide to enter the playing field. For these and other competitive reasons, drillers in North Dakota should remain vigilant about continually improving their operations.
"Cost management is important because it allows you to continue operating if oil process fall," Hill said. "Also, companies have taken on a lot of debt to buy acreage and develop the Bakken. Bringing down operating costs is key to generating good profits there. Companies require careful management of their balance sheets. And all that gas flaring isn't right--the industry has got to do better."
Hill also recommended oil producers not shy away from being part of the solution to difficult challenges, such as affordable housing, building adequate gathering system capacity and finding ways to transport water across the state, from Lake Sakakawea to drilling sites.
"There's lots of water in North Dakota--you can't say that about Texas or the Marcellus shale," Hill said. "Water management is less of an issue in North Dakota than elsewhere, but it is an issue that bears on the future growth of oil production."
For more on the USGS estimate, see September 12, 2013, article - North Dakota's Oil and Natural Gas Set Production Records--Again.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
North Dakota crude oil production averaged 821,598 barrels per day (BBL/d) in June, which was the most recent data available when Information Forecast Incorporated (Infocast) (Woodland Hills, California) held its Fourth Annual Bakken Infrastructure Finance & Development Conference. Shortly after the conference ended, the North Dakota Industrial Commission reported the state's crude oil production surged more than 50,000 BBL/d during July, to 874,460 BBL/d.
North Dakota's crude-oil production "has more than tripled over the last three years--a terrific performance," said Jeff Spearman, vice president for oil, gas and chemicals at SAIC Energy, a unit of SAIC Incorporated (NYSE:SAI) (McLean, Virginia). Production "will at least double over the next 10 years," he predicted. "If you think it's good now, going forward the opportunities will be absolutely terrific. Production will steadily get better."
Spearman's confident view was echoed by another conference speaker, Peter Hill, executive chairman of Triangle Petroleum Corporation (NYSE:TPLM) (Denver, Colorado). "We're still very early in the Bakken, but we know it is a massive oil field of unprecedented magnitude." He said the recent revised estimate of North Dakota's crude oil reserves, prepared by the U.S. Geological Survey (USGS) (Reston, Virginia), is far too conservative. That estimate, made earlier this summer, pegged North Dakota's undiscovered and technically recoverable oil resource at 7.4 billion barrels. Hill said that estimate "is bloody wrong and very short. You should ignore it."
Instead, Hill recommended crude-oil producers and service companies focus on last year's estimate of crude oil in the Bakken and Three Forks formations, prepared by Continental Resources Incorporated (NYSE:CLR) (Oklahoma City, Oklahoma). Continental was one of the first drillers to identify, measure and exploit the Bakken, and Hill said Continental's estimate was more credible than the USGS's.
A continentally estimated 903 billion barrels of oil were in place in the Bakken and Three Forks formations in North Dakota. At a standard recovery rate of 3.5%, that means there are about 32 billion barrels of oil that could be recovered, Hill said. And if recovery rates improved with gains in hydraulic fracturing, that could sizably increase the amount of oil recovered from those formations, he added.
Hill and another speaker, Eric Schaeffer, manager of business development for Enbridge Pipelines (North Dakota), a unit of Enbridge Incorporated (NYSE:ENB) (Toronto, Ontario), differed over how far and how fast crude oil production would grow in North Dakota. Citing estimates from the North Dakota Industrial Commission, Hill said production could double by 2017, to 1.6 million BBL/d, if there are 225-250 rigs drilling in the state. Enbridge's Schaeffer said that he thinks a doubling in production will not take place until 2022, under the best conditions. No one said that production had peaked.
Hill acknowledged that when crude-oil prices are high and production is growing, some might be inclined to pay less attention to drilling or operating costs, corporate debt, land acquisition costs, gas flaring or water issues. He cautioned attendees at the Infocast conference to run a tight ship and pay attention to operating and financial details, because oil is a dynamic global commodity. Crude oil prices could drop. Political sentiment could turn against operators. Oil giants like ExxonMobil (NYSE:XOM) (Irving, Texas) or BP plc (NYSE:BP) (London, England) could decide to enter the playing field. For these and other competitive reasons, drillers in North Dakota should remain vigilant about continually improving their operations.
"Cost management is important because it allows you to continue operating if oil process fall," Hill said. "Also, companies have taken on a lot of debt to buy acreage and develop the Bakken. Bringing down operating costs is key to generating good profits there. Companies require careful management of their balance sheets. And all that gas flaring isn't right--the industry has got to do better."
Hill also recommended oil producers not shy away from being part of the solution to difficult challenges, such as affordable housing, building adequate gathering system capacity and finding ways to transport water across the state, from Lake Sakakawea to drilling sites.
"There's lots of water in North Dakota--you can't say that about Texas or the Marcellus shale," Hill said. "Water management is less of an issue in North Dakota than elsewhere, but it is an issue that bears on the future growth of oil production."
For more on the USGS estimate, see September 12, 2013, article - North Dakota's Oil and Natural Gas Set Production Records--Again.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
