Closer Look At RBN Energy's Update On The Bakken

Yesterday, RBN Energy had a great post on the Bakken. I linked it but did not say much about it.

Because it was all about the Bakken, I thought I would go through some of the high points made by Sandy Felden. Some data points:

The numbers have certainly outpaced earlier predictions

As [RBN Energy] pointed out recently Bentek was projecting as recently as 2011 that North Dakota crude oil production would not reach 875 Mb/d until at least 2017 – four years from now. Now output from North Dakota is on course to reach 1 MMb/d by the end of 2013. If you add recent production data from Montana (~75 Mb/d) and South Dakota (~5 Mb/d), which is only available through May 2013, the total US Williston Basin production is somewhere north of 950 Mb/d today.

Rig counts have come down a bit, but drilling has increased

The data shows the rig count dropping off in September 2012 (187 rigs) and staying at that level since then even as production continues its upward trajectory. As [RBN Energy] predicted in [its] 2013 New Year Prognostications, faster drill times, more efficient operations, multi-pad drilling and a variety of technological enhancements have resulted in increasing productivity from each rig in the US. That translates into more barrels from each rig that is working.  So fewer rigs are needed to generate the same number of new barrels.

Crude-by-rail (CBR)

As [RBN Energy has] relayed on many occasions, the build out of twenty crude rail-loading terminals in North Dakota during 2012 brought relief to Bakken producers by facilitating a way to bypass the Midwest pipeline logjam. Although rail transportation is typically more expensive than pipelines, railroad shippers could deliver direct to coastal locations where prices were considerably higher – justifying the extra freight.

The graph, from the North Dakota Pipeline Authority is simply incredible:

Again, from RBN Energy: The use of rail to ship Bakken crude to market may have declined over the past few months but the terminals have not gone away. And the pipelines that were sucking air back in April have won some new business but they are still not running at capacity. That is because Bakken producers now have an abundance of crude takeaway capacity on both rail and pipeline – even as production is surging.

Summary

Bakken crude oil production continues to increase relentlessly. Overall production and well productivity are higher than anyone expected a couple of short years ago. Along the way the transportation hiccups have not had any noticeable impact on output. Producer and shipper ingenuity in the Bakken devised the crude-by-rail workaround to bypass the Midwest logjam roadblock to market. Now pipeline and rail capacity together offer more than enough space to get expanding crude production to market this year and next. 

Almost the entire narrative comes from RBN Energy; please go to the link to see the entire story and additional graphics, but it was important enough in the Bakken story that I did not want the narrative to be lost.