Vol. 17, No. 16 Week of April 15, 2012
Providing coverage of Bakken oil and gas

Bakken reserves to jump

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USGS next recoverable oil estimate expected to double to 8 billion barrels

Ray Tyson

Petroleum News Bakken Editor

The U.S. Geological Survey, in a highly anticipated report to be released next year, is expected to at least double the amount of oil reserves that can be recovered from the U.S. portion of the massive Bakken play in North Dakota and Montana. This is the consensus of company executives and industry consultants interviewed by Petroleum News on the sidelines of the 2nd Annual Bakken Investor Conference held April 2-4 in Minot, North Dakota.

April 2008 was the last time the USGS reported on the immense play, estimating it held from 3-to 4.3 billion barrels of undiscovered, technically recoverable oil in an area generally known as the Bakken formation. The study estimated mean undiscovered volumes of 3.65 billion barrels of oil, plus 1.85 trillion cubic feet of associated-dissolved natural gas, and 148 million barrels of natural gas liquids. That estimate represented a 25-fold increase in the amount of oil that could be recovered compared to the agency’s 1995 estimate of 151 million barrels of oil.

The Upper Devonian-Lower Mississippian Bakken formation is a thin but widespread unit wit in the central and deeper portions of the Williston basin that in addition to Montana and North Dakota, include the Canadian provinces of Saskatchewan and Manitoba. However, USGS reserve estimates on the Bakken are limited to U.S. territory.

The Bakken reserve estimate of 2008 was larger than all other USGS oil assessments of the lower 48 states and was the largest continuous oil accumulation ever assessed by the USGS. A “continuous” oil accumulation means that the resource is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences, according to the USGS. At the time, the next largest continuous oil accumulation in the United States was the Austin Chalk of Texas and Louisiana, with an estimated 1 billion barrels of technically recoverable oil.

The next Bakken reserve update was to begin in October 2011 and take two years to complete, depending on project financing, according to the U.S. Interior Department.

Drilling, fracking more advanced

But a lot of Bakken oil has gone to market since the 2008 USGS reserve estimate. For one, more well data is available for analysis. Back then information was gleaned from just a few hundred producing wells, compared to thousands of wells that have since been drilled and put on line. Moreover, the technologies of horizontal drilling and shale fracturing, which made the Bakken oil boom possible, are far more advanced.

Therefore, the USGS 2013 reserve estimate is expected to be around 8 billion barrels or more of technically recoverable oil, depending on whether additional oil zones, such as the Three Forks, located below the Bakken formation and sourced by the Bakken, is included in the next reserve assessment, according to industry leaders.

“That’s what I’m hearing based on new data that’s come in on the wells that have been drilled,” Laura Erickson, an industry consultant and head of Williston, North Dakota-based Plains Energy Technical Resources, LLC, said of the 8 billion barrels reserve projection. “There have been a lot of development areas; new fields that have been developed; and plenty of wells that have been drilled.”

“I think there are a lot of people who think that (8 billion barrels) is reasonable,” Terry D. Hildestad, president and chief executive officer of MDU Resources Group, told PN, noting that production from his company’s last eight wells was up more than 40 percent from wells MDU drilled a year earlier.

“I mean that is phenomenal,” Hildestad added. “That’s because we’re getting better at understanding the geology, the fracking and all of that stuff you do in a well. And that’s not unusual. That probably happened in Alaska and to a lot of other oil plays. People get smarter and get better.”

Recovery rate is 3-6%

Moreover, the Bakken is in a relatively early phase of development, with a paltry 3-6% recovery rate of all the oil in place. However, once in-field drilling begins in earnest, and enhanced recovery techniques, such as CO2 injection and water flooding, are employed, the Bakken’s ultimate oil reserves could reach well beyond the 2013 estimate of 8 billion barrels.

Marty Beskow, executive vice president of Voyager Oil & Gas, pointed out that many operators have been drilling single wells on a typical 1,280-acre spacing unit in order to secure mineral rights to their leases while booking some reserves. However, he said, each unit could ultimately support five wells in the Bakken alone and another five in the Three Forks, for a total of 10 wells per unit.

“I don’t know whether the study will include Three Forks estimates,” Beskow said of the 2013 USGS study. “But both of them should be increasing because of those technology advances and just being farther along the learning curve. For each well that an operator drills that’s another piece of information they didn’t have before. I believe the estimates for the Bakken and Three Forks will be higher on whatever number they come up with.”

Geological and engineering consultant Kathleen Neset, president of Neset Consulting, came to North Dakota 33 years ago as a geologist with Core Laboratories. She’s known as the “Godfather of the Bakken.”

More rock, more reservoir

“I’ve seen people coming up with even larger numbers” than 8 billion barrels, depending on how much of the Three Forks formation is included in the USGS study,” she said. “You add more rock to the reservoir, you add more reserves. But keep in mind that the entire system is sourced by that Bakken shale. Even the Three Forks is sourced by that same rock.”

The USGS will include both the Bakken and Three Forks formations in its 2013 assessment.

“The more we know about the geology, the more robust and accurate the assessment can be,” Stephanie Gaswirth, USGS task chief of the Williston basin assessment, was quoted as saying in the April 7 edition of the Dickinson Press.

The USGS did not study the Three Forks formation in its 2008 assessment, Gaswirth added, telling the newspaper, “at that point, there was little activity in the Three Forks, and there has been quite a boom in the Bakken and Three Forks. There’s a lot of new information both geologic and production wise.”

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