Folks came to the Black Hills Bakken Conference in Spearfish, S.D., earlier in May, hoping that the experts would confirm widespread speculation that their native South Dakota was on the cusp of an oil boom equal to the one currently under way in neighboring North Dakota.
Answers provided by geologists who addressed the conference and were interviewed separately on the sidelines ranged from not likely to a flat out no. It’s really a simple matter of geology. While the giant basin that contains North Dakota’s prolific Bakken formation extends down into northwestern South Dakota, the Bakken does not.
“That’s why we haven’t seen the payoffs and the frenzy and the economic development — the good, the bad and the otherwise — like North Dakota has associated with development of the Bakken,” said Derric Iles, a state geologist and head of South Dakota’s Geological Survey.
Formations get thinner
Moreover, the few geological formations shared by the two states via the Williston basin thin out and move closer to the earth’s surface as they approach the basin’s fringes, including northwestern South Dakota. Also, temperature and pressure, which vary according to depth, can greatly affect the composition of hydrocarbon-bearing rocks. So oil from the same formation can be more or less producible when depth is plugged into the equation.
“The basin environment is not in South Dakota; the fringes of the basin are in (northwestern) South Dakota,” said Kathy Neset, a contract geologist and owner of Neset Consulting Service Inc. “So that’s going to limit the work that’s done.”
“I don’t think there’s much for thickness and deposits,” added Forrest (Buzz) Skretteberg, a retired oilman who worked for Superior Oil and ExxonMobil during his long career. “The structure is there but it’s not the Bakken.”
South Dakota does have oil. It produced about 1.6 million barrels in 2010, but only as much as North Dakota had produced in less than four days.
However, this is not to say that South Dakota may not contain significant quantities of oil and gas, or that South Dakota entrepreneurs could not provide support services for North Dakota’s booming economy.
“I think South Dakota has definite potential for future development of our oil and gas resources,” Iles asserted.
Mapping South Dakota
But the fact South Dakota is said to be largely underexplored, or altogether unexplored, makes it virtually impossible to accurately map the state’s oil and gas resources.
The Red River, Tyler and Three Forks formations are of particular interest to geologists. That’s because North Dakota produces from all three, while South Dakota produces primarily from the Red River, a deep conventional reservoir discovered in the early 1950s.
Early on producers identified Red River as South Dakota’s main pay zone and target for company investment, meaning Tyler and Three Forks rocks drilled through on the way to the Red River, located 8,500-9,000 feet below the earth’s surface, were generally discarded and therefore never adequately tested for their hydrocarbon characteristics and potential.
“It’s just like going to the doctor’s office,” Iles said. “It’s the same thing with any sort of science. If your testing process is not designed to look for something, you’re apt not to find it.”
Tyler and Three Forks
The Tyler and Three Forks formations in South Dakota are predominately shale plays, which, if proven to hold commercial quantities of oil, would greatly benefit from the same horizontal drilling and hydraulic fracturing technologies that made it possible to produce from the Bakken formation. None of these technologies is currently being applied in South Dakota.
In fact, Three Forks actually underlies the Bakken on the North Dakota side of the border and extends into South Dakota. Meanwhile, Three Forks is proving to be a prolific producer in North Dakota with rates rivaling the Bakken. And both formations can be accessed from the same surface unit with as many as 10 laterals combined, maximizing production.
Directly above the Three Forks in South Dakota, and at the same level in the rock record as the Bakken in North Dakota, is a formation called the Englewood Limestone. It isn’t as thick as the Bakken and the rock composition is different, “but nevertheless you can knock off a chunk with a rock hammer and it smells like crude,” Iles noted. “Is there actual potential there? We don’t know. We’re underexplored.”
Shallower yet is the Tyler formation, which encompasses nearly all of western and southwestern North Dakota and unlike Three Forks, extends well into South Dakota.
A North Dakota state official once said the Tyler was most likely one-third to one-half the size of the Bakken in terms of coverage area and oil reserves. The Bakken covers some 25,000 square miles in North Dakota, Montana, Saskatchewan and Manitoba. Officials believe more than 4 billion barrels of oil can be recovered from just the U.S. side of the Bakken using current technology.
Transferring technology
Drilling into the Tyler has been happening in southwest North Dakota since the 1950s using traditional vertical wells. Some 285 Tyler wells have produced about 85 million barrels of oil over the past half-century. Geologists now believe the Tyler, which is located about a half-mile above the Bakken, may share some of its characteristics. So oil companies now want to exploit the Tyler using horizontal drilling and hydraulic fracturing technology learned from the Bakken and Three Forks.
“We think it could be a couple of years before they unlock the secret of drilling the Tyler,” Lynn Helms, director of the North Dakota Oil and Gas Division, told the Associated Press. “In our mind, we look at this as the equivalent of Bakken test wells in 2004. Things were very slow in the Bakken play for about two years until they cracked the code.”
In South Dakota, the Tyler formation is known as the Minnelusa. More specifically, it’s the bottom portion of the Minnelusa that equates with North Dakota’s Tyler. “It does cover a huge chunk of our state … but not all of it has a lot of oil and gas for sure,” Iles said.
No well has adequately tested the Tyler formation in South Dakota’s northwestern quadrant, which geologists believe is the most likely location for a major oil discovery, primarily because of its proximity to producing areas nearby in North Dakota, including the Tyler, as well as Three Forks.
“I don’t believe that we have adequate exploration … so I can stand up here and tell you with any degree of confidence that yes we do, or no we don’t, or be maybe we do for future development in the Minnelusa,” Iles said. “We just don’t know enough yet.
Migrating oil
Still, there have been encouraging shows from wells in different counties in western South Dakota that encountered quality oil at much shallower depths than ever expected, indicating the oil probably migrated upward from deeper formations.
“Nobody was more surprised than we were,” said Tony Petres, a former South Dakota state geologist and currently president of research firm Inyan Kara Group. “We don’t have enough chemical information for a typing study. But most of it is very nice light oil. There’s probably a good chance it’s Red River oil, or Three Forks.”
But there are disagreements. In North Dakota, it’s generally agreed that the source rock for Three Forks is the Bakken, while in South Dakota there is a theory that because the Bakken is absent in South Dakota, Three Forks is its own source of oil.
Nevertheless, Petres said companies he has talked with “take great interest” in the fact the various oil shows are shallow (1,500-2,500 feet) and that they evidently originate from shale. For example, Three Forks formation is at only 5,000-5,500 feet.
“That means they can apply technology directly … and that really turns them on,” he added. “The shallow stuff is interesting because it is stacked all the way down. … Those units are all oil saturated. But how many of them will be commercial, I don’t know.”
Leasing in South Dakota
Meanwhile, companies appear to be positioning themselves for exploration in South Dakota. For example, last fall the state’s Office of School and Public Lands auctioned off 67,000 acres in oil and gas leases to Bedrock Oil & Gas. Less than two months ago the state leased another 75,000 acres to the same company. All the mineral rights now held by Bedrock are good for five years and scattered across South Dakota in more than 360 parcels of land.
“This group is really banking on the future of South Dakota,” Iles said. “My best guess is that they are banking on our Minnelusa or Tyler formation.”
Neset said she has talked to four or five companies that are interested in leasing property in South Dakota. “That’s what I would expect right now,” she said, “and that’s going from southwest North Dakota to northwest South Dakota. They are private lands.”
North Dakota’s success
Iles said that because of the high success rate of Bakken wells in North Dakota, it could take several years — perhaps as long as five years — before exploration gets under way in South Dakota.
“If you are an investor with the $8 million to $10 million that it costs to drill one of those wells, you’re going to go to North Dakota, if you can,” he said.
“And if you are already in their system, you are going to invest your money there, because you are pretty much guaranteed a payback, as opposed to coming to South Dakota to do some wildcatting. I think we have to wait for things to slow down a little bit in North Dakota, to get those investors to even look seriously at South Dakota. But I think it’s inevitable that we’re going to see some more exploration in South Dakota.”
