Released September 16, 2021 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The Bakken Shale has good rocks, but further efficiency gains and faster federal permitting are needed in order to attract more drilling capital, an executive with ConocoPhillips (NYSE:COP) (Houston, Texas) told a virtual conference organized by Hart Energy (Houston) last week.
"The Bakken is an attractive asset for us," Dan Clark, ConocoPhillips' vice president of the Rockies business unit, told the "DUG Bakken and Rockies" virtual conference September 8. "It has great geology in a relatively mature state of development. It is a well-characterized area with relatively low risk, and its cash flows are predictable."
Click on the images at right to see a graphic on oil production from the Bakken shale and new-well production in the formation.
ConocoPhillips produced about 95,000 barrels of oil equivalent per day (BOE/d) in the Bakken during the second quarter. About 78% of that production was liquids. "We see a long, bright future for the Bakken," Clark said. However, "there are (cost) challenges in the Bakken that make it less competitive within our portfolio."
It costs ConocoPhillips more to extract oil from the formation when compared with its operations in the Permian and Eagle Ford shale plays. As well, the Bakken has greater distance to markets compared to those Texas formations. The Bakken, located mainly underneath North Dakota and Montana, has fewer offtake options than the Texas formations. And it takes far longer to secure a federal drilling permit on federal lands in the Bakken, when compared with the Permian and Eagle Ford basins, Clark said.
All of these factors "hurt the competitiveness of the Bakken compared to the Permian and Eagle Ford," he said. "Any improvement in permitting timelines would improve the competitiveness of the Bakken." Clark added there was "a lot of uncertainty over the future of the Dakota Access Pipeline," one of the primary outbound pipeline systems bringing Bakken crude to markets.
Given President Joe Biden's effort to decarbonize the U.S. economy, it is unlikely the industry will see faster federal permitting of oil wells in the Bakken, a point the ConocoPhillips executive did not address.
ConocoPhillips' outlook for the Bakken may have dimmed following its acquisition of Concho Resources (NYSE:CXO) (Houston) in a $9.7 billion, all-stock deal last year. That acquisition, which gave ConocoPhillips access to a lot of low-cost acreage and production in Texas' Permian Basin, will generate about $1 billion per year in synergies and cost reductions, Clark said.
Acquiring Concho also lowered ConocoPhillips' average cost of oil supply to under $30 per barrel. In contrast, Clark said, much of its production in the Bakken has a per-barrel cost of about $40.
"We still have lot of running room in the Bakken, and we're looking to lower costs there so we can attract more capital," he said, referencing various efficiency gains like using advanced data analytics to optimize well completions; upsizing valves and regulators; debottlenecking facilities; and installing new advanced meters in the field. These and other improvements have allowed ConocoPhillips to shave about $4 per barrel off its costs to operate in the Bakken, he said, noting: "Small changes can make a big difference," he said.
During the conference, a slightly more upbeat assessment of the Bakken was offered by another large producer, Marathon Oil Corporation (NYSE:MRO) (Houston). "We're bullish on the Bakken," said Martin Stuart, vice president of operations. "We see decades more of positive outcomes, productivity and sustainability."
Like Clark, Stuart pointed to operating and efficiency gains that have improved the economics of extracting oil and gas there. Marathon is also using advanced data analytics to predict when equipment performance is starting to deteriorate. The producer has dramatically lowered downtime for electric submersible pump (ESP) changeouts using advanced data analytics.
"For us, data analytics is helping us to make better decisions," Stuart said. "We have used it to better understand the health of the ESPs and downhole conditions. If you can proactively change them out (before they actually fail), you'll find some pretty significant savings. Before we had this predictability, we'd have wells down for somewhere between 45 and 60 days while we changed out an ESP. We're now down to 7-10 days, which improves our cost and it means our wells are back online faster."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn.
"The Bakken is an attractive asset for us," Dan Clark, ConocoPhillips' vice president of the Rockies business unit, told the "DUG Bakken and Rockies" virtual conference September 8. "It has great geology in a relatively mature state of development. It is a well-characterized area with relatively low risk, and its cash flows are predictable."
Click on the images at right to see a graphic on oil production from the Bakken shale and new-well production in the formation.ConocoPhillips produced about 95,000 barrels of oil equivalent per day (BOE/d) in the Bakken during the second quarter. About 78% of that production was liquids. "We see a long, bright future for the Bakken," Clark said. However, "there are (cost) challenges in the Bakken that make it less competitive within our portfolio."
It costs ConocoPhillips more to extract oil from the formation when compared with its operations in the Permian and Eagle Ford shale plays. As well, the Bakken has greater distance to markets compared to those Texas formations. The Bakken, located mainly underneath North Dakota and Montana, has fewer offtake options than the Texas formations. And it takes far longer to secure a federal drilling permit on federal lands in the Bakken, when compared with the Permian and Eagle Ford basins, Clark said.
All of these factors "hurt the competitiveness of the Bakken compared to the Permian and Eagle Ford," he said. "Any improvement in permitting timelines would improve the competitiveness of the Bakken." Clark added there was "a lot of uncertainty over the future of the Dakota Access Pipeline," one of the primary outbound pipeline systems bringing Bakken crude to markets.
Given President Joe Biden's effort to decarbonize the U.S. economy, it is unlikely the industry will see faster federal permitting of oil wells in the Bakken, a point the ConocoPhillips executive did not address.
ConocoPhillips' outlook for the Bakken may have dimmed following its acquisition of Concho Resources (NYSE:CXO) (Houston) in a $9.7 billion, all-stock deal last year. That acquisition, which gave ConocoPhillips access to a lot of low-cost acreage and production in Texas' Permian Basin, will generate about $1 billion per year in synergies and cost reductions, Clark said.
Acquiring Concho also lowered ConocoPhillips' average cost of oil supply to under $30 per barrel. In contrast, Clark said, much of its production in the Bakken has a per-barrel cost of about $40.
"We still have lot of running room in the Bakken, and we're looking to lower costs there so we can attract more capital," he said, referencing various efficiency gains like using advanced data analytics to optimize well completions; upsizing valves and regulators; debottlenecking facilities; and installing new advanced meters in the field. These and other improvements have allowed ConocoPhillips to shave about $4 per barrel off its costs to operate in the Bakken, he said, noting: "Small changes can make a big difference," he said.
During the conference, a slightly more upbeat assessment of the Bakken was offered by another large producer, Marathon Oil Corporation (NYSE:MRO) (Houston). "We're bullish on the Bakken," said Martin Stuart, vice president of operations. "We see decades more of positive outcomes, productivity and sustainability."
Like Clark, Stuart pointed to operating and efficiency gains that have improved the economics of extracting oil and gas there. Marathon is also using advanced data analytics to predict when equipment performance is starting to deteriorate. The producer has dramatically lowered downtime for electric submersible pump (ESP) changeouts using advanced data analytics.
"For us, data analytics is helping us to make better decisions," Stuart said. "We have used it to better understand the health of the ESPs and downhole conditions. If you can proactively change them out (before they actually fail), you'll find some pretty significant savings. Before we had this predictability, we'd have wells down for somewhere between 45 and 60 days while we changed out an ESP. We're now down to 7-10 days, which improves our cost and it means our wells are back online faster."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn.
