North Dakota #1 in Future of Carbon Capture and Storage?

Carbon capture and storage (CCS) has to do with sequestering (capturing) carbon dioxide (CO2) and storing it somewhere. According to Wikipedia (which is as good a source as anything else, I guess), there are four industrial-scale storage projects in operation worldwide:

• Sleipner, North Sea, Norway, StatoilHydro, oldest (started in 1996)
• Snøhvit, Barents Sea, Norway, Statoil, development plan in 2001
• Salah, Algeria, "will be"
• Weyburn-Midale CO2 Project, southeastern Saskatchewan, 2000, world's largest

The Weyburn oil reservoir was discovered in 1954, and the CCS project was started in 2000, and is now the world's largest CCS project. The CO2 for this project is captured at the Dakota Gasification Company plant in Beulah, North Dakota, which has produced methane from coal for more than 30 years. At Weyburn, the CO2 will be used for enhanced oil recovery (EOR) with an injection rate of about 1.5 million tons per year. The first phase finished in 2004, and demonstrated that CO2 can be stored underground at the site safely and indefinitely. The second phase, expected to last until 2009, is investigating how the technology can be expanded on a larger scale.

The science behind the claim that man-made CO2 production is causing global warming has been debunked but that's another story for another time. But if you say anything long enough and loud enough, it eventually becomes the truth. Or at least it becomes the truth for those who subscribe to the New York Times newspaper.

For more on current thoughts of fracking and EOR, click here. 

I guess North Dakota can soon add CSS to its list of "number one's," along with durum wheat, ICBMs, long-range bombers, and honey production.

Price of Oil in Free Fall

Previous floor for oil was $60. I thought the new floor of $80 would hold (I was wrong).

Oil tied to value of dollar.

Free fall to $60 suggests a) the Euro is in much deeper trouble than anyone yet realizes; b) economy, especially in Europe, and probably US, is in much worse shape than people willing to admit; and, c) another buying opportunity.

I don't think Canadian oil sands are viable under $60/bbl of oil. The Bakken is viable down to $40 but I think we will see production even in the Bakken slowed if oil goes to $60/bbl.

Oil stored in Cushing, OK. I wonder if it's time for oil storage units in North Dakota?  Any purpose for additional storage units? Probably not. But that's something NDIC/Bismarck legislators/Bank of North Dakota ought to think about. After all, the grain co-ops seemed to have worked nicely over the years.

Bottom line: some folks might be seeing some great opportunities with the pullback.

Update: shortly after posting the above, White House Paul Volcker said about the same thing. The beginning of the demise of the Euro?  Will Germany be the first to opt out?

Barrons: Platts Publishes First Daily Spot Price for Bakken Crude Oil

From a Platts press release:  "Beginning today, U.S. Midwest and Canadian oil producers, refiners, traders and other market observers can benefit from the launch of the first open-market spot price assessments of crude oil from the Bakken Shale formation stretching across central United States and parts of Canada."

For more information:  http://www.platts.com. This is a subscription site, and I had a devil of a time finding any useful information on the Bakken, but then I don't have a whole lot of time to search a "busy" site and I don't pay for subscriptions (yet). Maybe I should.

I know I'm wearing rose-colored glasses (or would they be oily-sheen-glasses) when it comes to the Bakken, but I am convinced that the Canadian oil sands and the Bakken shale are still bigger stories yet to be played out. Color me irrationally exuberant.

Back of the Envelope: Whiting

In the month of March, 2010, Whiting's eighteen (18) wells in the Sanish generated $27 million in cash flow (at $70/bbl) at the wellhead; that works out to $323 million in cash flow for the year going forward if things stay steady.  (Does anyone really think Whiting's production in the Bakken will stay steady for the next year?)

According to Yahoo!Financial, Whiting's operating cash was $600 million for the trailing 12 months. Back of the envelope calculations suggest half of all of Whiting's cash flow is coming from a few wells in the Williston Basin.

And some folks think the Bakken is over-hyped.

By the way, Whiting's forward P/E is about 12, and share price is dropping significantly today. Just saying.

Maybe the boom is over.

Sorenson 11-3H, Whiting #17912

This looks like a pretty good well, still on the confidential list. It looks like it had first few days of production in February, 2010, with runs of about 15,000 barrels of oil (for the month of February). Then, for the full month of March, 2010, the Whiting Sorenson 11-3H, 3-152-91, had runs of 46,000 bopd.

At $70/bbl that translates to about $3 million at the wellhead for the month of March. This well is still confidential, but it looks like a long lateral running to the northwest into sections 35 and 36, 153-91.

Wind Projections = IPs

Wind projections miss estimates.

I guess wind projections are a lot like "IPs."

Over-promising and under-delivering.

ND Production Update

"Production in North Dakota's prolific oil path continues to grow exponentially," --- Associated Press, May 14, 2010.

"At the current pace, North Dakota is quickly gaining ground on California, the nation's third-biggest oil producer, industry officials say." -- ibid.

ND: 4,736 active wells
ND: average of 277,403 bbs/day (March, 2010)

Compare to 150,000 bbls/day in April, 2008.

A record 8.6 million bbls produced in March; up from previous high of 7.3 million bbls/day in February.

Prediction: production could hit 300,000 bopd this summer and 350,000 bopd next year.

Even natural gas production is setting new records: "an unprecedented 8.6 million cubic feet.

There are 114 active rigs in North Dakota; the last time there were a 100 rigs in ND was 1982. Thre was a record 146 rigs in October, 1981, but modern horizontal-drilling rigs are eight (8) times as efficient as the old rigs, according to experts.

California: 550,000 bopd
Alaska: 635,000 bopd
Texas: 1,000,000 bopd

How Many Wells Can You Squeeze Into a Section?

Out here in the suburbs of Los Angeles, specifically along the coast and in the municipalities of San Pedro, Long Beach, and Huntington Beach, one can find pumpers among residential communities. One will find one, two, and sometimes, even three, pumpers hidden behind a tall brick fence covered with foliage. These pumpers have been here for decades; I remember seeing them back in the 1970's when I went to school out here. Off and on over the years, the pumpers were sometimes pumping, sometimes dormant. Right now, all of them are pumping. It's quite interesting to see. I would assume many of these are strippers now, pumping less than 50 barrels / day, but that's $3500 at the wellhead per day for something that probably costs a few dollars to operate.

But I digress.

What I really wanted to talk about was the number of wells that Whiting is going to squeeze into its leases in the Sanish. Check out Case 12695 that was added to the NDIC Hearing Docket scheduled for Friday, May 28: Whiting is requesting fifteen (15) 1280-acre spacing units in the heart of the Sanish where it already has two long laterals per two sections. The townships affected are: 153-93, 152-92, 153-92, and 154-92, 152-91, 153-91, 154-91, and 153-90.

Whiting's "big" Bakken wells are in this area: IPs in the range of 1,500 to 2,500. (Yes, "we've" discussed the issue of IPs before, but I don't think Whiting is drilling to lose money.)

Update: after posting the above, I ran across this discussion thread -- BEXP will also be putting in as many as four wells in each 1280-acre spacing unit due to poor permeability in the Bakken. This explains why fracking is so important, and it also suggests that fracking is very limited in geographical reach -- perhaps my 400-foot reach is too optimistic. Will EOR (CO2 injection) be the real key to success once all those wells are in place? Wouldn't it be ironic if CO2 production (a "greenhouse gas") keeps America hooked on oil? Will there be enough CO2 to stimulate all those oil fields? Smile. One can only hope. Is CO2 injection a one-time shot, or is it continuous? Is there going to be a whole new pipeline industry developed for CO2 injection. (As a reminder: the science for global warming due to man-made CO2 production has been debunked. This reminds me of Woody Allen's movie Sleeper in which after waking up after years of sleeping, it's been determined that smoking is good for one's health.)  When all the trees in the Amazon die because there's a relative dearth of CO2, then the government will pay us to generate CO2. Smile.

GIS -- What Does It Mean?

This is a "random" post as my daughter would say.

Yesterday, while listening to news while visiting southern California, it was noted that a team from a company called "Geographical Information Systems" was sent to the Gulf of Mexico to help with the oil spill. It finally dawned on me what "GIS" stands for at the NDIC map: GIS Map Server. If you go there, the map server is in the sidebar on the left, about halfway down.

If anyone is really interested in "GIS," click here for a Wikipedia discussion.  It's sort of like GUI ("graphical user interface" -- the acronym made famous by Apple Computer, Inc., years ago when talking about "WYSIWYG" -- pronounced "wissi-wig"). It's hard to believe but there was a time with WINTEL (Microsoft Windows software / Intel chip), one did not always have such a nice interface.

Understanding the NDIC GIS Map Server, Tips:

1. Spacing units