Sunday, July 22, 2012

Industrial Revolution -- The Bakken

On July 20, 2012, I posted a rather lengthy note regarding the industrial revolution occurring in North Dakota.
"... the Bakken has become the laboratory in which new drilling techniques were tested. It is amazing how far "we" have come from 1-stage fracking back in 2007 to 40-stage fracking now."
I have posted similar notes several times over the past two years about the importance of the Bakken as more than just another local boom, and it seems I am posting similar reminders with increasing frequency. 

Earlier today I received the following from a reader, with slight editing:
I am starting to grasp the justification for referring to the role of horizontal drilling/fracking in the Bakken as the start of an INDUSTRIAL REVOLUTION, as has been reported a number of places,  more recently by Clay Jenkins in his 7/14/12 radio program, reporting on your blog this last week, and in the Bismarck Tribune this past week.
Earlier this week  I read in Forbes magazine article about STATOIL buying out Brigham, that one of the key reasons this Brigham purchase took place was to enable STATOIL to gain expertise in developing oil shale energy  plays,  so that STATOIL would have more opportunity to participate in  development of RUSSIAN shale plays.

So it seems that one justification for referring to this as an industrial revolution, is that fact that this is more than just another oil boom  (which prior oil booms tended to be restricted to one smaller segment of the globe – Alaska – Gulf Coast – Eagle Ford – Bakken – Marcellus,  for example).

By contrast the spread of horizontal drilling / oil shale fracking – is apparently leading to an explosion of energy development around the world (earning the characterization of being an “industrial revolution”).
Just sharing the “light bulb” that has finally gone on in my mind about about the pending oil/gas industrial revolution.   
Most likely others had already grasped this concept long before I did.
In fact, based on the number of naysayers that still exist, I don't think this "light bulb" has been turned on for as many you might think. 

This note really made my day and that's why I wanted to post it. Yes, this -- the Bakken laboratory -- is really a very big deal.

In addition to the local boom and the laboratory noted above, a third component is often overlooked: how much economic activity is being generated outside North Dakota to support this boom: steel, railroad, larger rigs (built out of state), larger and newer pipeline; fracking sand; oil service companies; utilities; etc. A

Anyway, you get the point.

A Tale of Two Cities -- Fremont, CA / Williston, ND

A huge "thank you" to CRC -- this link is being provided in case folks don't read comments. This really is a rewarding article to read on so many levels. Again, for newbies, I apologize. I am very, very biased. I grew up in Williston, North Dakota, so it was particularly "fun" to read.

In case the link is broken, google the subject and look for the The Examiner, Washington, DC.  Fremont is home to Solyndra.
If the Obama folks back in 2009 thought Fremont was the harbinger of America's future, one wonders what thoughts they had, if any, about Williston, N.D.

Probably none at all. North Dakota was for many years the state least visited by people from other states, an orderly rural state with about the same population as in 1930. There's no voter registration because everyone would know if a stranger came in to vote.

On the Missouri River bordering Montana, Williston and surrounding Williams County were quiet farming territory. The county's population reached 19,000 in 1930, then slumped, and only topped 19,000 again in 2000.

Williams County was the home of Henry Bakken, the farmer after whom the Bakken shale formation was named when it was discovered in 1953. For years geologists knew there was a lot of oil packed into the shale rock, but it was not economic to get it out.
Until recently.

Somewhat off-topic, some folks have written to me, talking a bit about the history of homesteading in North Dakota, mineral rights, farm subsidies, etc. My world view of all this was influenced by one of the first "real" books I ever read: Giants in the Earth, by Ole Rolvaag. I don't recall how I stumbled upon this book back in middle school or whenever it was. I assume it was on a reading list or when I asked one of my teachers for a book recommendation, this was the one given. Anyway, folks curious about the original settlers in and around Williston (as well as the entire upper central Midwest) would do well to read this book to get a better feeling of my "worldview" regarding the development of the oil patch.

For Investors Only: Natural Gas to $8 --

I don't know if ISA posted this link or not, but Don sent it (the link) to me this a.m. and reminded me that it was not many years ago that a natural gas pipeline was being considered to move natural gas from Alaska to the lower 48. My, how times have changed,

But times may change again.

The linked story talks about natural gas inventories in the US. This line early in the story did not excite me.
After Thursday’s numbers were released inventories stood at 3.163 trillion cubic feet or 19.2% above last year but only 17.5% above the five year average. 
I don't know about you, but when someone tries to suggest there's a difference between 19% and 17.5% on something like this, my eyes start to glaze over... but then the writer got my attention with the very next line:
A seemingly decent cushion until you consider as recently as May 10 stockpiles were 48.4% and 49.9% ahead of the previous year and the five year averages respectively.
Just two months ago, stockpiles were almost 50% above the 5-year average, and now, down to less than 20% -- and the air conditioning continues....

So, we'll see.

And, yes, natural gas in the Bakken is turning out to be a bigger deal than most anticipated.

Oldest Oil Field in the Williston Basin Is Update -- The Beaver Lodge

For what it's worth, I have updated the oldest oilfield in the Williston Basin, the Beaver Lodge field, "owned" by Hess.

For newbies, this might pique your interest, one of the wells in that oilfield (two IPs in red; one IP for the Silurian payzone; one IP for the Devonian payzone):
  • 2562, 340/564, Hess, Beaver Lodge-Devonian Unit C-3051, Silurian/Devonian, t11/59; cum 706K/2.74 million bbls --> total, over 3.4 million bbls; was producing 4,000 bbls/month in 1997 when it was taken off-line; produced for almost 40 years; 

Dollar Joe Oil Field Update -- The Bakken, North Dakota, USA

For what it's worth, Dollar Joe oil field northeast of Williston has been updated. This is a fairly typical Bakken field just outside the better Bakken area, but surprisingly good. It is very active right now with five rigs in the fiield and a sixth rig on the northeastern edge.

It's a great field to compare Hess wells and CLR wells head-to-head.

Mike Continues His Series: IPs Are Up For Oasis With 36 Stages

Link here to

36 stages and a lot of water and proppant.
Oasis is currently saving approximately one million per well by using Oasis Well Services. By the end of June, it had already completed 9 wells. It estimates a total of 20 wells in 2012. This savings should help to keep well costs down, considering the amount of water and proppant used. I will be real interested in next quarter's results given the use of its own pump trucks.

A Reminder: Don't Come to The Bakken Without a Plan ...

... like a place to stay, a job, savings to get you through the first six months.

This is not new. This was being reported and folks were being warned as long ago as two years.

Housing is expensive IF you can find it. I could be wrong, but there are indications that new housing is available but financing through a bank can be difficult -- my hunch is if you put down 20% you will have a better chance of getting the loan. At least that's the way it is in California.

From the Dickinson Press/InsideClimate News:
Mary Catherine Moore came to Williston in June hoping to spend a year working a high-paying job.

Last week, the 50-year-old gave away her camper, got a $40 gas voucher from the Salvation Army and headed back to Texas.

“I tried it,” Moore said. “It’s not for me.”
I wonder if this was fact checked: "...after her jobs working in computer support were outsourced overseas." 

Random Note From Northwestern South Dakota: All Roads Lead to the Bakken

From the Rapid City Journal:
Sheriff’s officers are used to working long hours and making long drives in Harding County, which has around 1,200 people spread across 2,671 square miles. But now that drivers treat the highways that cut across the county as a thoroughfare to the Bakken oil fields, Sabo and Clarkson are finding it hard to keep up.
They said it; not me.