Three Forks Formation -- Basic Review, Part I

I was sent this presentation on the Three Forks formation. It's a PDF file so it might take a few minutes to download depending on your internet connection. I don't know where it was originally presented or posted. It is undated, but most likely very current since much of the information about the Three Forks Sanish has only recently been sorted out. I first received it May 24, 2010. This is the second time it's been sent to me.

The author is Stephan H. Nordeng, NDGS.

The source rock is the upper and lower Bakken shales, which includes the upper fifty feet of the Three Forks formation and probably the lower fifty feet of the Lodgepole.

Note the relationship of the Lodgepole, Bakken and Three Forks on the second slide.

The Bakken source rock has a very high total organic content (TOC) -- as much as 11%. To put that in perspective, Schlumberger says that most source rock has a TOC of at least 0.5%. "Very rich source rock might have a TOC as high as 10%" according to Schlumberger -- and, again, the Bakken has a TOC of as much as 11%.

Wikipedia lists five areas in the world where "world class" source rock exists:

• The Bakken
• Norwegian Sea (North) and North Sea
• Venezuela
• Saudi Arabia
• Norwegian Sea (South) and The Netherlands

For comparison, TOCs:

• Bakken: as high as 11% (see above)
• United Arab Emirates: 0.3 to 5.5%
• Saudi Arabia: 2 to 5%
• Trinidad: 2.2%
• North Sea: 5.6%

Slide five: note how far east and south the Three Forks Sanish in North Dakota extends; east, well beyond Minot, and south all the way to the North Dakota/South Dakota border (the TFS extends into South Dakota, west into Montana, and north into Canada).

Slide 25 shows the various divisions of the Lodgepole, Bakken and Three Forks formations. Note that the Lodgepole has been referred to as the "false Bakken." [See this post, also, for Whiting's interest in the Scallion.]

Slide 28: when you look at slide 28, you can see graphically where the bulk of the oil in place (OIP) will be found. The "bulls-eye" or the very center of the basin is northeastern McKenzie County and southwestern Williams County. It's interesting that the Parshall oil field is fairly east of this center but yet has been so prolific for EOG. It makes one wonder about the potential yet to be seen in Williams and McKenzie Counties.

Slide 30: This is the slide that should knock your socks off. It shows the original amount of oil in place (OOIP) in barrels, and the estimated ultimate recovery (EUR) based on available technology. As predicted from slide 28, McKenzie County has the most OOIP, followed by Williams, and Mountrail, and then come Dunn, Divide, and Burke (6th).

McKenzie is by the far the biggest county. Williams, Dunn, and Mountrail are about the same size. Burke and Divide are each about half the size of Williams or Dunn, so on a per acre basis, I would bet the OOIP for Burke and Divide is similar to that of the very prolific Mountrail County.

Now in round numbers, here is the OOIP for each of these five counties (Bakken plus TFS):
McKenzie:  36.4 billion boe
Williams:    28.9
Mountrail:  28.9
Dunn:         20.1
Divide:       17.7
Burke:        17.0

Again, in round numbers, here is the EUR for each of these five counties (Bakken plus TFS):
McKenzie:   737 million boe
Williams:     714
Mountrail:    576
Dunn:           475
Divide:         200
Burke:          375

Finally, the EUR/OOIP ratio, as a percent:
McKenzie: 2.0%
Williams:   2.5%
Mountrail:  2.0%
Dunn:         2.4%
Divide:       1.1%
Burke:        2.2%

I do not understand the low percentage for Divide County.

But, in general, the USGS assumes that about 2% of the OOIP will ultimately be recovered. In fact, it appears that drillers are getting close to 3 or 4 percent. In some corporate presentations, the companies are suggesting they are getting as much as 8 percent (if I remember correctly; I have to confirm that). But my hunch is that the 2% figure provided by the USGS is a very, very conservative figure.

Response to My Comments On The Keystone LX Pipeline and Position of the Montana Governor

This was sent to me as a comment to one of my postings. My concern is that as a comment it would not be seen by very many folks, so here is the full comment, more easily found, and more easily read.

A huge thank you to Andrew Ottoson for commenting. This is a very nice response. If Governor Schweitzer supports the pipeline, I wonder if he has addressed Representative Henry Waxman's concerns, if he opposes Waxman's stance, or if he supports Waxman's position. I don't know, but that's where the rubber meets the road. My impression is that Henry Waxman wants the project stopped. Period. It's my impression that the governors of Montana and North Dakota want what is best for their states as long as it is also in the best interests of the nation.

The original story that I referenced certainly suggested that Governor Schweitzer would oppose the pipeline if he did not get the concessions he wanted. I think the pipeline is important enough to be completed even if "we" don't get what we want. In fact, there are a lot of other pipeline companies in North Dakota employing lots of folks and takeaway capacity seems to be fine for the foreseeable future. The Keystone XL isn't going to make or break the Bakken and whether it taps into the Bakken pipelines should not be a litmus test for approving/disapproving an otherwise important project.

Andrew Ottoson's comment:

I think Governor Schweitzer's concerns have been addressed. More info:

"...Montana Gov. Brian Schweitzer and oil industry leaders in the two states met with TransCanada officials in March to press the company into allowing U.S. crude in the pipeline."

http://billingsgazette.com/news/state-and-regional/montana/article_674e31be-7d51-11df-bc3b-001cc4c03286.html

“We continue to support the project,” Sarah Elliott, spokesperson for Gov. Brian Schweitzer, said on Tuesday. “It is another step toward better energy security and allows Montana oil another avenue to market.”

Schweitzer and North Dakota Gov. John Hoeven met during March in Billings with about 50 oil producers to discuss the possibility of an “on-ramp” for the Keystone XL Pipeline, a project of TransCanada.

“Montana and North Dakota are the only two states to have increased oil production over the last several years,” Schweitzer said at that time. “The proposed Keystone XL pipeline would provide infrastructure that could help maintain and even increase our level of production while bringing hundreds of new energy jobs and over $1 billion in investment to Montana.”

http://www.sidneyherald.com/articles/2010/07/10/news/doc4c34d12bdf6d9212039217.txt

Also, I don't know if Schweitzer has ever opposed KXL, just that he acknowledged pipelines pose certain environmental risks; sorry if my post is unclear on this. My post reflects that Schweitzer's words coincided with a moment when 50 members of the House of Representatives and Podesta were in the news for injecting environmental concerns into the public discourse on tar sands development.

Anyway, thanks for linking, and you may be interested in two more recent posts of mine on KXL:

http://andrewottoson.com/2010/06/perspectives-on-pipeline-safety/

http://andrewottoson.com/2010/07/list-keystone-xl-news-i-missed-while-out-of-town/

BP Quickie -- Asset Sale to Apache -- $7 billion -- but not Alaskan Assets, Yet

Did I just hear that correctly on CNBC at 4:13 p.m., Tuesday, July 20, 2010: BP sold assets to Apache for $7 million? If that's what I heard it's in line with the Bloomberg story over the weekend in which BP was trying to sell half its assets in Prudhoe Bay in Alaska for $10 to $11 billion in an all-cash deal.

Update -- 4:15, July 20, 2010: Yes, that is correct. Turns out that the $7 million figure is correct but for different assets. The assets are mostly North American, but not Alaskan. Rather, the assets are the Permian Basin assets in Texas, the Western sedimentary basin in Canada, and some assets in Egypt.

Apache needs to deliver $5 billion by July 31, 2010. BP needs to raise $7 billion by the end of the month.

How is the after-hour market for APA doing? Apache is holding in there fine: down 88 cents; no big deal.

*****

Here's the official press release:

Apache Corporation (NYSE, Nasdaq: APA) today announced it has agreed to acquire all of BP's oil and gas operations, acreage and infrastructure in the Permian Basin of West Texas and New Mexico and Egypt's Western Desert. Apache also will acquire substantially all of BP's upstream natural gas business in western Alberta and British Columbia. Apache will pay $7 billion for the assets, which include estimated proved reserves of 385 million barrels of oil equivalent (boe).

Comment: This is $ 18.18 per barrel based on estimated proved reserves. Operators in the Bakken (BEXP, WLL, CLR) talk about $14 - $24/bbl to find and produce. Not only do they get the oil, they get the acreage and infrastructure -- pipeline, pumping stations, etc. Seems like a very good deal for Apache.

Way Off Topic: But ND Has a New Number 1

In addition to being number four in production of oil in the continental United States, number one in dry edible beans, and number one in honey production, North Dakota can now add another first: first in broncing bulls.

Up until this year the number one contractor for rodeo bulls came from Oklahoma or Texas. The best bulls in the world now come from North Dakota.

This year PBR Professional Bull Riders Stock was named Contractor of the Year. PBR is located seven miles south of Mandan, ND. Look for the dust raised by stomping bulls.

In addition to what one would expect from a bull rider, Chad also hosts bull-riding seminars.

Among this year’s young riders in the seminar was Kallie Kautzman, 11, of Bismarck. She’s been riding horse since age 7 and has been rodeoing in the past two years — often beating the boys in her age group.

Chad Berger's ride to the top was meteoric and took only a bit longer than a ride on one of his bulls.

In 2003, Berger, a longtime professional cattle buyer, started building his own string of bulls that now numbers about 200 head, including Professional Bull Riders association stars Big Tex and Code Blue.

So, there you have it. Another first for North Dakota.

Regulators Say Global Banks Need to Beef Up Capital (Cash)

That's the headline: regulators say global banks need to beef up capital (cash).

These are the numbers taken from Yahoo!Financial:
Corporation:Cash On Hand (Operating Cash Flow Annual)

Barclays: $1.240 trillion (yes, trillion):$136 billion
Goldman Sachs: $780 billion: $38 billion
Citi: $770 billion: -$12 billion
JP Morgan: $750 billion: $90 billion
Bank of America: $650 billion: $100 billion
Wells Fargo: $115 billion: $21 billion
GE: $70 billion: $31 billion
Apple: $23 billion: $13 billion
Microsoft: $37 billion: $22 billion
XOM: $13 billion: $32 billion
Wal-Mart: $8 billion: $23 billion
US Bancorp: $8 billion: $8 billion
T (ATT): $3 billion: $34 billion

How much cash do the regulators want Barclays, Bank of America, Citi, JP Morgan, Wells Fargo, Goldman Sachs, JP Morgan, and others to sit on?

I remember enjoying Uncle Scrooge, the comic book growing up. Not much has changed.

*****

UPDATES

July 31, 2010: Some analysts agree -- it's time for the regulators to lighten up:

A marketing strategist says the tighter regulatory climate has resulted in banks’ increasing their reserves and subsequently reluctant to lend money. He argues the regulators need to loosen their grip slightly. “It’s a classic case of overreaction,” says the spokesman.

Headline Writers: Deja Vu All Over Again

I've posted this so many times, it's become predictable.

Today's headline: "Unemployment Rate Falls in 39 States in June"

Source: AP (Associated Press)

First line of story: The unemployment rate fell in most states in June, mainly because more people gave up searching for work and were no longer counted.

According to the story: things have either stayed the same or gotten worse, depending on one's perspective, but certainly "unemployment" hasn't fallen in 39 states. 

I expect to see this headline a month from now, again.

No wonder folks are leaving mainstream media and going to the internet, and the Drudge Report.

Update on Coal Projects in the Area

Updates

July 23, 2011: Update on Basin Electric coal gasification/CO2 generation and capture, as well as new calls for government policies to support EOR. 

October 30, 2010: Update on Coal Creek Station. This is Great River Energy's benefication plant located between Bismarck and Minot where lignite is dried to produce a better fuel. The concept is working and engineers from as far away as China are coming to visit. The company's patented process is called DryFining. This appears to be more successful than most people initially thought. A synopsis of this plant:

The Coal Creek Station in Underwood, ND, has a coal drying process they have been working on for years. "They" claim a 29% moisture reduction in the lignite, causing a 14.5 % increase in heat content of lignite. This process also causes a reduction of 52 % of SO2, a 37 % reduction in mercury and a 32% reduction in NOX2. This plant is also going to dry coal for a new power station being built in Jamestown, ND.

October 6, 2010: The nation's only commercial-scale plant producing natural gas from lignite paid off its last loan to the US government (long story, see link). The company is Dakota Gasification Company, a subsidiary of Bismarck-based Basin Electric Power Cooperative.

Original Blog

Call me obsessive-compulsive, but it often leads to good things.

It's a long, convoluted story -- too long and too convoluted to go into here -- but my obsession with DKRW has led me down a strange but interesting path, with lots of dots to connect.

I am a novice when it comes to coal, so this posting is simply for me to start understanding what is going on in North Dakota with respect to coal. Yes, it's a bit off-topic from the Bakken but there are too many stories about coal "in the Bakken" for this site to ignore. Again, this is for my benefit, and anyone who can shed light on what is transpiring is welcome to comment.

First, we all know about the South Heart Gasification Plant, or at least I thought I did. But I am getting a bit more confused. It's possible that there are three projects in the works in and around South Heart, Stark County, North Dakota (USA) regarding the use of coal.

Hopefully others will help me out.

The three projects:

• Beneficiation: A coal-drying process to transform lignite into a more efficient coal.
• Above-ground gasification: A coal-gasification plant.
• Underground gasification: An underground coal gasification project.

Beneficiation: The coal-drying process

This was the first story I linked: New Zealand shipping lignite to North Dakota to test the concept. Recent reports suggest that the New Zealand test was successful.

The plant in North Dakota, operated by GTL Energy and slated to open at the end of December, aims to prove that new technology can remove much of that water content and impurities to make the fuel more cost efficient and increase its energy value. French said the company hopes the plant will reduce lignite water content to 10 percent using a process called beneficiation.

The plant, which is designed to process about 240,000 tons of lignite annually, is the first commercial-scale project of its kind.

The coal-gasification plant

South Heart Coal (SHC) is a subsidiary of Great Northern Power Development (GNPD), which is affiliated with Great Northern Properties, the nation’s largest private coal reserve holder. In January, 2008, these two entities (SHC and GNPD) announced their intent to move forward with a $1.4 billion proposal for a coal-to-gas plant and coal mine at the same site. If the proposal is approved, construction could begin in December, 2009, (need to find update), and the plant would be operational in 2012. Subsequently (in 2009), SHC has changed its permit (due to legal wrangling) to forego the gasification plant and simply become an electrical generation plant.  [Update, November 4, 2010: South Heart Coal has resubmitted its proposal, but limits it to strip coal mining; promoters says coal-drying technology licensed from GTL will be used by a new plant to be built three miles west of South Heart.]

The project is located 30 miles west of the Theodore Roosevelt National Park and air status concerns for the park make the location problematic (need to find update). From SourceWatch.com.

Note: SourceWatch states the project would be WEST of the Theordore Roosevelt National Park. Folks living in the area tell me that the project is EAST of the park.  UPDATE: the folks at SourceWatch replied to my e-mail and said that yes, indeed, they will correct that. For me that makes the "air status concerns" a lot less problematic.

It is my understanding that South Heart Coal was also considering an IGCC power plant there (it is confusing to me whether this is a new project or related to the "coal-to-gas plant" noted above).

Integrated gasification combined cycle (IGCC) power plants are believed to be the type of power plants that will predominately be used to add to our electrical power supply, replace our aging coal power plants and out increasingly expensive natural gas power plants. Source: The Energy Blog.

Near Beulah, North Dakota, a coal gasification plant. 

Basin Elecric Power Cooperatiave (Basin Electric), through its for-profit subsidiary, Dakota Gasification Company (Dakota Gas), owns and operates the Great Plains Synfuels Plant (Synfuels Plant). The Synfuels Plant is the only commercial-scale coal gasification plant in the United States that manufactures natural gas. It is also the cleanest energy plant operating in the state of North Dakota, according to a comparison of emissions data available from the North Dakota Department of Health.

• Average daily production of natural gas is about 153 million cubic feet, the majority of which is piped to Ventura, IA, for distribution in the eastern United States.

• The Synfuels Plant supplies carbon dioxide to the world’s largest carbon capture and storage project in the world in Saskatchewan, Canada. Dakota Gas currently captures between 2.5 and 3 million metric tons of carbon dioxide per year.

• The $2.1-billion plant began operating in 1984. Using Lurgi gasifiers, the Synfuels Plant gasifies lignite coal to produce valuable gases and liquids. Located five miles northwest of Beulah, ND, the Synfuels Plant has been owned and operated by Dakota Gas since 1988.

• About $477 million has been invested in the Synfuels Plant since 1988 to achieve environmental compliance, improve efficiency, and invest in new byproduct development. 

DKRW is promoting a coal-to-methane-to gasoline project in Medicine Bow, Wyoming, in the far southeastern corner of the state. I assume this is an above-ground gasification project taking the process one step farther along, to make gasoline. 

Underground gasification concept
I first came across this concept earlier this month in a Bismarck Tribune.com story.

"It could be the bridge to a low-carbon, energy-rich future," said Friedmann, a researcher in carbon management for the Lawrence Livermore National Laboratory. "I consider this to be the cleanest coal."

The technique can be used on deep-underground coal seams that are shielded from groundwater. The process works by injecting oxygen and steam into a seam, sparking a chemical reaction that converts the coal into a gas that is collected through a boring injected into another part of the coal vein. The synthetic gas - "syngas" - that is produced can be used in electrical generation or processed into synthetic fuels and natural gas feedstocks.

"It's not a new technology, but it's one that is new to a lot of people," said Mike Fowler, who works on climate technology for the Clean Air Task Force, an environmental group in Boston. The process has been around for decades, but has not been used in North America until recently.

This needs to be updated, but at least I'm starting to get a clearer picture.

The importance of all this is to figure out politically where coal stands. I think the DKRW site is most helpful:

The CTL facility will utilize General Electric Company’s coal gasification technology to produce synthetic gas, which will be cleaned to remove substantially all of the sulfur and carbon dioxide (CO₂). This process significantly reduces greenhouse gas emissions and other environmental impacts associated with traditional uses of coal.  The cleaned syngas is conditioned, modified and converted to methanol.

It is my understanding that GE and the current administration get along with each other very nicely. The administration sees GE as a "green" company with GE's emphasis wind turbines (albeit a losing proposition). The DKRW site promotes its efforts by prominently including the corporate logos of Arch Coal, XOM, and GE.

This speaks volumes and suggests to me that despite all the anti-coal rhetoric coming out of Washington, coal as an energy source for America is going to be around for a long time.

By the way, remember: Warren Buffett bought Burlington Northern Railroad, which I believe is the largest mover of coal.