Eight (8) New Permits -- The Bakken, North Dakota, USA

Daily activity report, December 13, 2011 --

Operators: Baytex (2), BEXP (2), G3 Operating, SM, Hess, CLR

Fields:Plumer, Ray, Todd (Williston), Pembroke

SM has a wildcat in McKenzie; G3 Operating has a wildcat in Williams.

Whiting approved for eight (8) wells to be placed on confidential status: one in Billings County, three in Stark County; four in Mountrail County.

Of six wells released from confidential list, four were completed, and pretty good IPs:

• 19300, 634, EOG, Hardscrabble 5-0607H, Williams; Three Forks, 31 stages; 4MM lbs sand
• 19931, 1,257, Newfield, 1H Breitling 23-14, Williams; sand frac but no other info in well file
• 20382, 825, Petro-Hunt, Wisness 152-96-28A-33-1H, McKenzie; 23 stages; 2.9MM lbs sand
• 20806, 1,411, CLR, Dvirnak 2-7H, Dunn, no frac information in well file

Two wells on DRL status reported IPs, including this nice MRO well:

• 20304, 949, MRO, State Kovaloff 11-16H, Dunn

Sundance: Multipay Formations in Southeast Saskatchewan

Link here.

The formations being completed for production testing are the Bakken, Souris Valley-Lodgepole, Watrous, and Second White Specks. The Bakken formation is perforated and is waiting to be fracked and completed. Conventional completions will then be conducted on the Souris River-Lodgepole and the Watrous. Finally the Second White Specks will be perforated, fracked, and completed.

Expect to see the same in North Dakota.

Increasing Spread in Price of WTI Vs Bakken Sweet -- The Bakken, North Dakota, USA

Elsewhere they are talking about the increasing spread between WTI and Bakken sweet.

If the statement is accurate (that the spread is increasing), the first two things I would think of: a) continued over supply at Cushing; and, b) cost of transportation (rail is more expensive than pipeline, and we have all seen how well the pipeline story is going this month).

Headline: Euro Plunges -- But Oil Rises -- The Bakken, North Dakota, USA

All things being equal, a plunging euro (strengthening dollar) should cause oil prices to drop.

The price of oil maintained today, actually rose.

Chinese Proppants -- The Bakken, North Dakota, USA

The Reuters link here.

US imports of the proppants from China have surged 12-fold since 2008 ... At year's end, Chinese imports will account for 13 percent of the total North American ceramic proppant market ...

The boom may not last forever. US manufacturers are now gearing up to challenge the Chinese. Prices have surged by 60 percents in two years and experts expect China's own shale revolution to eventually absorb supply.

Names:

• Houston-based Carbo Ceramics
• French Saint Gobain
• China: a dozen mostly smaller, independent firms; one prominent Chinese firm: Guizhou

Click on "proppants" label/tag at bottom of the blog for other postings on ceramics at this site.

A big thank-you to AC22 for alerting me to link.

By the way, while I was in Williston -- heart of the Bakken -- I became aware of local residents of North Dakota being sent to China to visit the Chinese proppant factories, learn how to market ceramics, and then come back to North Dakota as dealers, salesmen, etc. What a huge opportunity.

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It seems half the linked article is devoted to the Bakken; data points:

• shipped to west coast ports (Long Beach, CA; Seattle, WA)
• shipped by train
• BNSF: largest rail carrier in the North Dakota's oil fields; expects ceramic freight volumes to double next year
• ceramic demand has quadrupled to 70 billion lbs since 2009
• percent of ceramics in fracking has risen from 10 to 15 percent in that time period
• typical Bakken well used 3 million lbs of proppants
• ceramic proppants have grown to 30 percent share of total proppants (most is still sand)
• sand crushed at depth
• sand: 40 cents/lb
• ceramics: $4/lb
• resin-coated sand: alternative to ceramics; cost not stated
• demand for sand growing in ND
• most prized sand: Ottawa sands from Wisconsin and Minnesota
• HAL and BHI both setting up their own mines to control costs

Airline Numbers Soaring in the Bakken -- The Bakken, North Dakota, USA

Airline boardings up 81 percent in Dickinson, 71 percent in Williston, year-over-year, November.

Dickinson Press link here.

Wow, That Snuck Up On Me -- Back to 203 Active Rigs in North Dakota -- The Bakken, North Dakota, USA

203 active rigs in North Dakota today; one short of the record 204.

Well, This is Cool -- Iran to Practice Closing the Strait of Hormuz

Ya gotta love it. The link takes you to the news that Iran wants to practice "closing" the strait.

Just think: not this year, but in a year or two, had we had the Keystone XL, we could have completely ignored events in the Strait of Hormuz. Sure, oil and the price of oil is now global, especially now that Bakken oil is reaching the Gulf of Mexico. The price of North Dakota sweet and Louisiana sweet will track with the price of Brent, but closing access to Mideast oil won't affect supplies in North America; it will simply affect the price. [Some have written in suggesting I am wrong on this. My reasoning depends on several conditions, not worth time or effort to expand. Maybe later.]

This Iranian saber-mongering is simply that, saber-mongering. To me it suggests that Iranian leadership is in desperate trouble; this is their second-to-last ace card. I wonder how long Iran will close the Strait? One hour or two hours? My hunch is that folks in the Mideast are "scheduling" the event to be least disrupting to the tankers moving through the strait.

At best it's a power game. It will be interesting to see if Saudi asks the US Navy to keep the strait open, or just let this play out. I know what I would do if I were "king for a day," but its counterintuitive so I will keep my thoughts to myself.

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It turns out the Iranians are oil investors' best friends. Just when the price of oil was headed down, I see oil is headed back up, up $2.00 today. If Bakken investors work this right, maybe we can invite the faux-environmentalists back to Nebraska to block any re-routing of the pipeline to ensure that the price of Bakken oil remains on the high side. It looks like we have plenty of takeaway capacity with the railroads for the time being, and if Nebraskans like all those 100-tanker unit trains rolling through their scenic countryside and through their towns and villages, well, what can I say.

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I see electric rates have skyrocketed.  This, despite the fact that we've been in a recession, and the economy continues to sputter along. But the skyrocketing rates are not a surprise. Don has been talking about this for months -- regardless of what the linked article says, it all goes back to legislation, rules, and regulations to kill the coal industry, the cheapest form of energy to generate electricity; putting up transmission lines for wind farms that are not needed (and, in fact, will wreak havoc with electric grids); and, mandates for renewable energy from states like California. From the linked article:

Households paid a record $1,419 on average for electricity in 2010, the fifth consecutive yearly increase above the inflation rate, a USA TODAY analysis of government data found. The jump has added about $300 a year to what households pay for electricity. That's the largest sustained increase since a run-up in electricity prices during the 1970s.

Electricty is consuming a greater share of Americans' after-tax income than at any time since 1996 — about $1.50 of every $100 in income at a time when income growth has stagnated, a USA TODAY analysis of Bureau of Economic Analysis data found.

Maybe I've missed it, but I've not seen one bit of an improvement in quality of life in the US after years of mandating a cleaner environment through renewables like solar and wind. It would be nice to see one example of something positive coming out of wind or solar energy. I haven't seen it, and it certainly isn't for lack of looking.

Here's the link from below.

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Until the Iranian news this a.m. there wasn't much news. I was going to talk about the squandering of America's riches and the lost decade (2000 - 2009) and it appears, at least another lost decade (2010 - 2019) with the White House cronyism that has resulted in such a mess of things energy-wise one does not even know where to begin. The story of the US Navy buying biofuel at $16/gallon vs conventional jet fuel for $4/gallon is the Democrat's answer to the GOP's $600 hammer or toilet or whatever it was. I guess I prefer the Bush II style of cronyism: at least that group understood the concept of win-win.

The difference is this, I suppose: we expect cronyism and back-door deals from the GOP. The good news was they came up with ideas that served their interests, but also helped the country. It was my understanding that the new administration, back in 2007 and 2008, promising hope and change, also promised more transparency and an end to cronyism.

So, that's what I was going to write about.

I was also going to point out that when I read about the $16/gallon biofuel (vs $4/gallon conventional jet fuel), it was obvious that to make this work (high priced biofuel), the price of conventional oil, gasoline, diesel, and jet fuel was going to have rise at least a bit to make biofuel not look so expensive. Or create an appearance of a shortage of fossil fuel, "panicking" the Americans into accepting biofuels as a remedy. What better way to create a perception of shortage and/or raise the price of fossil fuels precipitously than by banning fracking; placing a moratorium on off-shore drilling including the entire gulf; and, killing strategic pipelines.

And then like a light switch being flipped, I saw the light.

It's been my experience that humans like the "rules of three." This has been discussed at length by philosophers. The Trinity is as good as any other example. Three's are nice. Medications are often prescribed "tid/three times daily" with no scientific basis for such prescribing. The Saturn V that took men to the moon had three rocket stages. The US nuclear cold war strategy was a triad: submarine-launched ICBMs, land-based ICBMs, and Air Force bombers (particularly the B-52, bless it's heart -- the B-52 is now celebrating its 60th birthday, or something like that -- it first flew in 1952 and is still flying).

So, I didn't see it until today, but any administration that wants to kill the fossil fuel oil and gas industry should have a  three-point strategy also: a) ban fracking; b) ban off-shore drilling; and,  c) ban new strategic pipelines. This particular administration has come close to accomplishing this. With the Iranian headline this a.m. I assume the administration has to re-think the timing of their strategy. They don't want the price of oil to spike just before the election season gets into full swing.

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For newbies looking for information on the Bakken, some data points, based on FAQs I continue to get. All of this has been written about numerous times on this blog, but based on comments, it appears that most folks don't read much of the archived material, reading only the daily posts. This means that for regular readers, this is all old news.

As a rule of thumb, or if talking to folks at the Economart, some quick sound bites regarding the Bakken (my opinions only; others will weigh in with their own opinions):

• the Bakken is the best source rock in the world
• Saudi Arabia's TOC of one-half percent does not even come close to the Bakken's 11 percent
• Bakken wells pay for themselves in three years, often as soon as 18 months
• Bakken wells will continue to produce oil for 35 years
• drilling will continue through 2020, perhaps 2030; it will take 50,000 wells to drill out the Bakken; about 5,000 Bakken wells have been drilled so far
• there is no shortage of fresh water for fracking in North Dakota
• production from the Bakken will continue through 2100
• there is a suggestion that before it's all over, oil shipment by crude will play an equal role to pipeline
• short laterals used to cost $3 to $6 million; long laterals now cost $10 million
• operators desperate to cut costs; jury still out re: sand vs ceramics
• while jury is out, we will see decrease use of ceramics; increase use of sand only
• the Bakken might be in the second inning of a nine-inning game; surprises may lead to extra innings
• North Dakota is now producing 500,000 bopd, putting ND on track to surpass California and Texas 
• North Dakota could jump to second place, behind Texas, in oil production by this time next year
• there are "no" dry holes in the Bakken
• as a rule of thumb, a Bakken well will produce 1,000,000 bbls of oil over the lifetime of the well
• there are multiple payzones in the Williston Basin; the Bakken is the focus right now
• the Eagle Ford in Texas is getting a lot of press right now; wiki suggests the Eagle Ford has 1 billion bbls recoverable oil; all agree the Bakken has 3 billion bbls recoverable oil; some think the Bakken + the Three Forks has 24 billion bbls recoverable

Navy Buys Biofuel for $16/Gallon -- ObamaNomics

Updates

May 14, 2016: Solazyme update.  In 2016, Solazyme "ditches biofuels" and according to Fortune:

Solazyme, now renamed as TerraVia, says it will no longer focus on its fuels and its industrial businesses, and instead will double down on selling its algae oil to the food and personal care industries, for use in products like cooking oil, protein powders and face lotion.

Along with the new focus, the company has announced a $200 million supply deal to sell algae oil to Unilever for personal care products, and new financing of $28 million from a handful of food-focused investors, like founder and former CEO of Popchips Keith Belling.

August 12, 2015: back in the news; sold biofuel to the US Navy for $149/gallon; turned out to be a money-laundering scam; US stimulus money (to save the planet) given to Solazyme; Solazyme then gives money to Democrats and to the Democratic party; at least that's what is being said
 

Original Post

Hot Air Green Room link here.

The farmers will be happy.

Data points:

• Conventional jet fuel: < $4/gallon
• Cozy relationship between Dept of Agriculture and US Navy --> biofuel for $16/gallon
• Some of the biofuel is being purchased from Solazyme (California-based)
• Strategic advisor at Solazyme: TJ Glauthier, a member of Obama's presidential transition team; worked on the energy-sector portion of the 2009 stimulus bill....
• Solazyme's partner: Dynamic Fuels, Louisiana, joint venture, Tyson Foods and Tulsa-based Syntroleum
• Dynamics Fuels plant openeed in Louisiana in 2010; by far the largest biofuels plant in North America
• Dynamics Fuels, with a plant in Finland, produce 94% of the world's biofuels
• KLM is using some of that expensive biofuel (4x the cost of conventional jet fuel) but Dutch govt subsidizes

So, when I read that that the military can't handle budget cuts, I can now say, "what?" They can start by buying competitively priced conventional jet fuel. My hunch is US Navy would have been better off funding research for coal --> jet fuel and/or natural gas --> jet fuel.

I get lots of comments sent into me that farmers are inappropriately subsidized by the US government. I disagree but if you feel that way, let the president know how you feel about $16/gallon biofuel. Write him, not me.

Another link for this incredible story. From that link:

Solar panels, of course, have been shown to require a very energy intensive process to produce nearly negating any benefits from solar energies supposed renewability.

The algae blend biofuels that Solazyme produces has proven to be less efficient than originally anticipated as well. A study from the University of Virginia showed that algae biofuels require more petroleum based energy to produce than other biofuels and generate more greenhouse gases.

The actions of the Obama administration and connections to his crony TJ Glauthier only further confirm his willingness to reward his cronies with taxpayer dollars for junk science. Glauthier’s associated grants and funding, to the tune of more than half a billion dollars, show that the tentacles of Obama administration’s green cronyism reach beyond the Department of Energy.

And so it goes. The good news is that with this much fat in the system, plenty of opportunity to cut when "push comes to shove."

More Evidence the Bakken Boom Is Moving West and South -- The Bakken, North Dakota, USA

Every time one thinks the boom might settle down a bit, perhaps reach a status quo, there are more stories of the surge continuing. 

Glendive, Montana -- about 100 miles from the epicenter of the boom is starting to feel effects of the boom.  Billings Gazette link here.

Even Texas native Jim Cargill, president of Dawson Community College, has never seen an oil boom quite like the one exploding into Montana from North Dakota.

Earlier this year, Cargill began noticing the boom’s effect on his college, located less than 100 miles from Williston, N.D., the epicenter of the hectic Bakken oil development.

A one-bedroom apartment in Glendive that used to rent for $400 now goes for $800 to $1,000. Mobile homes rent for $1,000 or more.

Motels and hotels are filled, too, with some oil field crews now living in Glendive because there are no vacancies in Williston and Sidney.

By the way, just before I left Williston a couple of weeks ago, motel rates had reached the $250/night threshold at one motel; most motels were in the $190 to $200 range. 

Glendive is taking the boom west. Meanwhile in the south, along with Almost, North Dakota, which doesn't like a lot of men living together in one building unless they are monks or construction workers, Glen Ullin has been affected by the boom. Glen Ullin seems to have its act together: the headline suggests otherwise, but Glen Ullin is willing to work with companies on a case-by-case basis. The Bismarck Tribune link is here.

Hess: Getting Its Mojo Back? Random Look At Another Hess 6-Well Pad -- The Bakken, North Dakota, USA

Back on May 28, 2010, Hess was issued permits for a 6-well pad in Robinson Lake oil field. Let's see how they have done:

• 19074, 629, Hess, EN-Frandson-154-93-2116H-1; RL, Bkn, s7/10; t12/10; cum 84K 4/12
• 19075, 225, Hess, EN-Frandson-154-93-2116H-2; RL, Bkn, s8/10; t5/11; cum 65K 4/12
• 19076, 1,325, Hess, EN-Frandson-154-93-2116H-3; RL, Bkn, s8/10; t8/11; cum 153K4/12
• 19077, 717, Hess, EN-Trinity-154-93-2833H-1; RL, Bkn, s7/10; t2/11; cum 114K 4/12
• 19078, 941, Hess, EN-Trinity-154-93-2833H-2; RL, Bkn, s8/10; t7/11; cum 110K 4/12
• 19079, 1,125, Hess, EN-Trinity-154-93-2833H-3; RL, Bkn, s8/10; t8/11; cum 138K 4/12

These are some great wells.

Look at #19076: it reported almost 100K in first three months. My rule of thumb is that the well is on its way to being paid for as it reaches the100,000 bbl cumulative milestone. Yes, I know costs of fracking have increased significantly, and there are many, many variables, but my hunch is I am not too far off based on a posting many months ago when CLR talked about the first Bakken well that had paid for itself. (I can't find that post now; maybe I will stumble across it someday.)

It's been my experience that whenever I get into these discussions, I get a lot of pushback telling me I'm way off, so I generally don't spend too much time on posting this information. But for newbies, 100,000 bbls is a nice milestone by which to track and compare Bakken wells. By the way, if this well is pretty much paid for in the next few months, remember, a Bakken well will likely produce for 35 years, and over that period of time will be refracked several times. There are folks who opine that secondary production will exceed that of primary production.

And finally this, it was / is not uncommon for a Madison well to produce for 20 years before it produces 100,000 bbls.