Tuesday, April 30, 2013

US Government Agency Announces "Another Bakken" Discovered In North Dakota! USGS Doubles Estimate of the Bakken: 7.4 Billion Bbls Of Recoverable Oil; And That's The Mean; Top Line Is 11.4 Billion Bbls; Both Numbers Considered Conservative By Some


May 10, 2013: back-of-the-envelope calculations. The four counties with the most activity: Dunn, McKenzie, Mountrail, Williams, around 10,000 square miles. One section is a square mile. It's pretty much agreed there will be four wells in each section in this part of the Bakken: 40,000 wells. EURs/well of 500,000 are certainly likely. 40 x 500 = 20,000 x 1,000 x 1,000 = 20 billion bbls of oil in these four counties.
Now, let's say someone suggests 4 wells/section throughout the entire 4-county area is a little optimist, then we have one-half of Burke County (500 sq miles); Divide County (1,000 sq miles); Stark County (1,000 sq miles -- where Whiting's Pronghorn Prospect is): 2,500 sq miles = 2,500 sections. Let's say just two wells per section at 300,000 bbls EUR. 2 wells/section x 2,500 sections = 5,000 wells x 300,000 bbls = 5 x 300 = 1,500 x 1,000 x 1,000 = another 1.5 billion bbls, which is extremely conservative.
So, very, very conservative, 20 billion bbls. USGS says 7.3 billion, and Lynn Helms says the 5% probability figure of 11 billion bbls is a reasonable target. And I do believe that folks like Harold Hamm were looking at 20 billion bbls recoverable from the middle Bakken alone, even before considering the Three Forks. 
May 10, 2013: I just noticed that Lynn Helms, Director, NDIC, released a press release on the USGS 2013 survey of the Bakken. He said he was happy with the survey, stating clearly that the figure of 11 billion barrels of recoverable oil was an appropriate target. The mean of 7.38 billion bbls was not mentioned, suggesting that Lynn Helms feels strongly that 11 billion bbls is the more likely figure.

May 6, 2013: Minneapolis StarTrib article on assessment.

Later, 5:27 pm: Carpe Diem's take on the new assessment.
“These world-class formations contain even more energy resource potential than previously understood, which is important information as we continue to reduce our nation’s dependence on foreign sources of oil,” said Secretary of the Interior Sally Jewell. “We must develop our domestic energy resources armed with the best available science, and this unbiased, objective information will help private, nonprofit and government decision makers at all levels make informed decisions about the responsible development of these resources.”
Does this mean SecInterior Sally Jewell will support fracking?
Later, 2:59 pm: The Oil & Gas Journal is reporting
The Bakken and Three Forks formations in North Dakota, South Dakota, and Montana hold an estimated mean of 7.38 billion bbl of undiscovered, technically recoverable crude oil, the US Geological Survey announced.
The updated assessment represents a two-fold increase from the 2008 estimate of 3.65 billion bbl in the Bakken, it noted.
The update includes the Three Forks for the first time.
USGS’s latest assessment found that the Bakken has a 3.65 billion bbl estimated mean resource—unchanged from 5 years ago—and Three Forks has an estimated mean 3.73 billion bbl. The formations’ combined estimate ranges from 4.42 million bbl, with a 95% chance of production, to 11.43 billion bbl, with a 5% chance.
Other data points:
  • 6.7 Tcf of associated / dissolved natural gas
  • 0.53 billion bbls of natural gas liquids 
The narrative continues:
Gas estimates ranged from 3.43 Tcf (with a 95% chance of production) to 11.25 Tcf (with a 5% chance) and 0.23 billion bbl (95%) to 0.95 billion bbl (5%) of NGLs. These estimates represent a nearly three-fold increase in mean gas and NGL resource estimates from the 2008 assessment, due primarily to the inclusion of Three Forks Formation, USGS said.
Later, 12:17 pm: Tweets keep coming. Bits and pieces starting to flow re: USGS estimate: Hoeven: 7.4 billion is a mean number. Top line is 11.4 billion barrels.  Hoeven says both numbers likely conservative. Just between you and me, there is a huge difference between 7.4 billion and 11.4 billion. Using a calculator, I get a difference of 4 billion. The four-billion-delta exceeds the 3.6 billion bbl USGS estimate in 2008. In other words, the USGS has just announced "another Bakken" has been discovered in the United States. It is located, coincidentally enough, in western North Dakota.

Original Post

The Grand Forks Herald is reporting:
The U.S. Geological Survey said today there is nearly twice as much recoverable oil in the Williston Basin than its estimate of five years ago.
The USGS has determined that there are approximately 7.4 billion barrels of oil that could be pumped from western North Dakota and eastern Montana.
The last USGS study, released in April 2008, identified 3.65 billion recoverable barrels of oil in the Bakken formation. The new estimate includes oil that could come from the Three Forks formation in addition to the Bakken formation.
Some have already noted: 3.65 x 2 = 7.3. The new estimate is 7.4. So I don't quite understand the GFH's reporter saying that the "7.4 is nearly twice as much." The fact is: 7.4 is more than twice as much. And then we find out that 7.4 is the "mean" number; in fact, the top line was significantly higher. [Later: now that I see more data, as provided by The Oil & Gas Journal, it makes sense why the GFH reporter said "nearly twice as much."]

We'll have to wait to see the report for the full details.

If the recovery rate is 5%, then we're talking 148 billion bbls of original oil in place.

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Later, 11:57 am:

Platts is now tweeting:
USGS estimates about 7.4 billion barrels of undiscovered/technically recoverable oil lies in the Bakken and Three Forks tight oil formations.
I wonder where that "undiscovered" Bakken/Three Forks oil is? I assume much of it is under Harold Hamm's oil rigs, and much of it is under the multi-well pads going in. As my daughter would text: LOL.

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A reader sent me a very lengthy comment regarding the USGS 2013 Survey of the Bakken/Three Forks. I am including it here for archival purposes. It will be interesting to come back in five years and re-visit this analysis:
Some thoughts regarding the recent USGS assessment of the undiscovered oil and gas in the Bakken/Three Forks.
It seems to me, based on current development, the estimate is conservative, but 7.4 billion barrels is a lot of oil! It would take average production of over 600,000 barrel of oil per day in North Dakota to produce this amount in 30 years.  We know it is likely total production for the Bakken zones will continue beyond 30 years but it seems obvious there will need to be very high production in the next 10 years or so to get a 600,000 barrel average over the long term.
It also appears, USGS did not re-visit their 2008 Bakken only numbers even though new fracking and completion techniques have revolutionized development in the past five years.  They added the 3.7 billion barrel estimate for the Three Forks with very little direction as to “sweet spots” or the role of the various “benches” in this zone.  The only conclusion has to be the Three Forks contains a little more producible oil than the Middle Bakken alone. 
I have difficulty matching the USGS study will current production results and actual drilling/permitting programs. For example, the Nesson-Little Knife Assessment Unit is an area almost 150 miles north to south and from 25 to 40 miles wide.  Since the south 20 miles of this unit has not shown much promise in the Middle Bakken, I only included the 130 miles (N-S) and 30 miles average east to west.  This results in 3900 square miles or 1950 1280 acre production units.  The USGS Middle Bakken study shows 1.149 billion bbls of recoverable oil in this unit.
Divide 1950 units into this estimate and it results in a little less than 600,000 barrels per 1280 acre unit.  The USGS also referred to something less than 300,000 barrels ultimate recovery for a well draining 400 acres in “sweet spots.”  Is the USGS assuming two 300,000 barrel wells per unit or three 200,000 barrel EUR wells per unit?  Scanning the area from north of Dickinson to the north end of the Nesson Anticline and reviewing current production results, drilling and permitting, 2 or 3 Mid Bakken wells per unit with a total EUR for the entire 1280 acre unit of less than 600,000 barrels doesn’t seem to match with reality.  Many units approach or exceed this total in their first two or three years of production. 
I did a similar study of the Central Basin Assessment Unit.  This unit may make sense from the geological perspective but actual drilling and production results vary greatly.   A large portion of the this AU in North Dakota is in the “sweet spot."
The Montana segment has had less drilling and less impressive production results so far.   In North Dakota this AU has about 1,625 1280 acre drilling units.  If you allocate 90% of the undiscovered oil in Central Basin Unit to the North Dakota units, you again get about 600,000  barrels of recoverable Middle Bakken oil from each 1280-acre unit.  From an economic unit perspective this would be about two Middle Bakken wells per unit.
Continental Resources would be through drilling with one per unit with their 603,000-barrel-per-well estimate. (I think this is very optimistic, but 350,000 to 450,000 bbls of oil per well in “sweeter spots” seems more reasonable). 
I will concede that the 2013 USGS numbers might be “spot on.”  Time will tell.  For me, I will pay attention to what current operators in the Bakken are doing.  These operators most certainly have their own set of numbers for the acreage they control.  The actual pay-out of these wells will determine future development. Theory and analysis are important but cannot replace actual results. 
Perhaps clarification from USGS concerning recovery by 1280-acre unit will help in understanding their methodology. 
Finally, I’ll say it again:  “7.4 billion barrels is a lot of oil!"
It sure is. 

4 comments:

  1. Snopes still has the old USGS survey info. Not saying they have to use CLR or ND view, but they don't even have the newest USGS. Unsat.

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    1. You are correct. I visit Snopes every so often to see if they have updated Bakken data. They have not. It speaks volumes about Snopes.

      By the way, I think you can find a comment or two from me at the Snopes-Bakken site.

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    2. I've dropped them several notes and they acknowledeged them. But no update. Not only is the USGS TRR not updated, but the article has a gratuitous comment about production being "still less than a half million bpd". [We are now up to over 1 million bpd.]

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    3. It speaks volumes about the integrity of the Snope web site authors and their accuracy in other posts. Without question they really blew it on this one.

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