Some Thoughts on the Bakken

Because many folks may not see some of the great comments folks send into the blog, occasionally I highlight them with a stand-alone post.

This is another such case.

"M4570D0N" alerted me to this article on the Bakken. This is an article questioning the relevancy of the Bakken.

Note the date of that post: March 4, 2011. That's like two days ago. I would have thought we were way past these articles. The information posted there has been posted and re-posted on a recurring basis since the Elm Coulee discovery in 2000. Well, I don't know if that's completely accurate, but I have seen these comments posted on a regular basis since 2008.

I "love" The Oil Drum.com. It is one of my favorite sites on the internet, but I don't access it often. I'm too tied up with events in the Bakken.

This particular article on the Bakken in The Oil Drum is another great article. I enjoyed reading the first few paragraphs, and then quit. To me, it's nothing I haven't seen before.

"M4570D0N" asked if I might respond.

My standard reply to such as those articles in The Oil Drum is this: "we all have our myths."

That is not an original observation. It was first noted by JRR Tolkien, author of The Lord of the Rings.

When JRR Tolkien said that"we all have our myths," he did not mean that any single individual's belief system was a myth in the sense of the usual definition, but rather, once one has a certain belief (or as many now say, a "world view"), that belief is not easily shaken.

If one believes that hobbits exist in Middle Earth, no matter how much one tries to convince that individual otherwise, the hobbit-believer isn't likely to change his/her belief system.

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At this point, one can stop reading, the rest is rambling.

1. With regard to horizontal drilling and fracking, I get a chuckle out of this. A long time ago I said the same thing, that horizontal drilling was "new." Wow, did I get a boatload (or semi-load) of comments about what an idiot I was. Yes, horizontal drilling  has been around since 1949, I guess. In the big scheme of things, a) horizontal drilling pioneered by Meridian in 2000 was "new" compared to what folks had been doing; and, if not, b) 1949 isn't exactly ancient history. But, except for historians, debaters, and navel-contemplators, who cares. The point has been made: horizontal drilling is not new. Let's move on.

2. With regard to everything else, no, the Bakken has not solved "world hunger" and never will. But for me everything about the Bakken is impressive.

I have said numerous times on this blog I am inappropriately exuberant about the Bakken. I love it. I find it fascinating.

I am amazed that a Leigh Price could take data that was known to everyone and be the only one that believed what he was seeing. And put his "myth" in writing.

I am amazed that a single individual, Harold Hamm, with common sense and believing what he was seeing, could "force the government" analysts to agree that there is a bit more recoverable oil in the Bakken than what they originally computed. And now, he says there is a lot more. And the government analysts agree; they are only quibbling over the definition of how much is "a lot."

I am amazed that a specialty steel company in Luxembourg (that's a country in Europe, not a hamlet in North Dakota) can make steel that will be used in a rod that can withstand -40 degree temperature at the surface and thousands of degrees at the end of hole two miles into the earth. The company is Teneris, if any investors want to know.

I am amazed that a 20-year-old roughneck from Texas is willing to push that steel rod into the earth while enduring -40 degree temperatures on the platform of a monstrosity of a modern drilling rig.

I am amazed that the United States is focused on Libya as a great oil producer (1.5 million barrels/day) when North Dakota is on its way to the same amount: predictions are that North Dakota could produce 1 million bopd by 2015; even at my advanced age, that's within my investing lifetime).

I am amazed that multi-billion-dollar Fortune 500 companies are willing to hire 21-year-old men and women to drive multi-ton semis hauling oil over gravel roads in the middle of North Dakota winters that I hazard to drive in the summer.

I am amazed anyone can drill a horizontal lateral 15,000 feet after going down vertically 9,000 feet and ending up pretty much where they wanted to go.

I am amazed they use mud to push the drill bit.

I am amazed a Bakken well can produce 1 million barrels of oil over the life time of the well through a rod with a one-inch diameter. A one-inch diameter that is often choked (closed down) to half an inch. That's a lot of strokes over the lifetime of a pumper. A million barrels of oil through a half-inch opening.

I am amazed that there are "no" dry Bakken wells. In the Permian basin, when they started, fourteen out of fifteen wells were "dusters" or dry. When they started, only one out of 15 wells in the Permian hit oil. It's a headline for me when a Bakken well is dry. Has anyone seen a headline lately in a local newspaper saying they hit oil? Again? 1,000 times this year that headline could be written.

I am amazed anyone can guide a drill bit using mud to hit a specific formation that may be only five feet thick five miles from where the well began at the surface.

I am amazed that a geologist will examine and meticulously record the characteristics of the earth at ten-foot intervals (or whatever the intervals are) for thousands and thousands of feet.

I am amazed there is so much water in the Missouri River that they could frack 10,000 wells this year, and still the Missouri River and its tributaries will flood this spring.

I am amazed that the federal government could shut down domestic drilling. Especially when the loss of "onepointfivemillionbopd" (Libya) causes oil to spike to over $100/bbl. And that oil doesn't even come to the US.

I am amazed that the major pipeline company in North Dakota isn't even going to bother shipping anything other than Bakken sweet oil. As it is, the company is going to have to double pipeline capacity to keep up.

3. I find the Bakken a fascinating story. I am reading a biography of Mark Twain and his newly (2011) released autobiography. It is fascinating that a story about two boys on a raft written by a steamship pilot could change American literature. A story written by a steamboat pilot in the 1800s continues to be a bestseller, and today, in 2011, there are folks who cannot get excited about the Bakken. In fact, that book from the 1800s is still required reading in many schools, while "peak oil" and "global warming" are taught down the hall in a course called "science."

That is amazing. I don't care if the Bakken oil doesn't live up to some of the things written about it. To some extent, the Bakken has already surpassed much that has already been written. I love going back to some of the original scientific articles from the UND geology folks and find this conclusion regarding the Bakken, written as recently as 2007: "The Bakken has potential for producing a fair amount of oil." Yes, that is paraphrased. I don't want to embarrass anyone. 

4. This site started out simply as an educational site. Actually, not quite true. It really started out as a way for me to keep track of what was going on in the Bakken. A word document would not suffice, but HTML was perfect. Going that route, I could have kept it private, but I then thought it could serve an educational purpose. My intent never was to bring in the investing side to this site. But over time I realized one could not talk about the Bakken without talking about the men and women and companies involved, and one cannot talk about companies without it naturally leading to investing.

Money is not important to some folks. Lots of money is not important to many folks. But for those few interested in money or investing, learning about the opportunities in the Bakken has been very, very rewarding.

My hunch is that more people are working in the Bakken than are currently involved in building wind turbines in the entire United States.  My hunch is that more money has been made investing in Bakken companies than listening to pundits recommending investing in banks on Wall Street, or investing in coal-powered cars.

On a macro-level, the Bakken will not solve "world hunger." To that degree, the writer of that Oil Drum article is correct.

But on a micro-level, a lot of folks have done very well believing in the Bakken. And "believing" is the right word. After all, as JRR Tolkien would say, "we all have our myths."