Peak Oil InThe Bakken? -- Not Likely In The Near-Term -- September 23, 2018

Updates

Later, 7:54 p.m. CDT: a reader wrote --

On the Peakoilbarrel site, we are having an extended discussion regarding both the Platts' story and the ND Pipeline Authority report that was the source of the data.

I highly recommend, when your time allows, you download and scan the recent - September, 2018, ND update from the DMR site, which is the NDPA report. 

Most important data point (also mentioned in Platts'  story) is Bakken should peak in about 15 years at 2 MM barrels/day level. 

Also, at 1,200 New wells/year and $61 wellhead pricing, OVER 60 years of drilling remain. [Note: I have previously linked a similar presentation and referenced it. The presentation this writer references is at this link: https://northdakotapipelines.com/presentations/. At that link it's the September 14, 2018, presentation; if clicked on, a pdf will quickly load on your desktop.] 

Later, 5:25 p.m. CDT: a great example of why the Bakken will be in the catbird seat for quite some time, regardless of Nick's pessimism (see original post). OPEC says $11 trillion invested needed to meet crude oil demand through 2040. Source: CNBC and OPEC, both well known for integrity and impartiality.

Original Post

From oilprice:

The short answer: a resounding no.

The story: oh, as soon as I saw it was written by Nick Cunningham, I already knew the slant. LOL.

The lede:

While the Permian has experienced a drilling boom and has received tons of media attention, a lesser-known but still remarkable revival has been underway in the Bakken this year. At the same time, the increased rates of drilling in North Dakota are starting to reveal signs of strain on the basin, as drillers are increasingly forced into less desirable locations. [They are not being forced to move anywhere: the so-called Tier 2 locations becoming economically enticing as the price of oil goes up and the price of drilling/completing a well goes down.]

The Bakken was hit harder than the Permian during the oil market downturn that began in 2014, with rigs and capital diverted away from North Dakota and rerouted to West Texas. Oil production hit a temporary peak in late 2014 at 1.26 million barrels per day (mb/d), declining for much of the next two years.

However, production began to rise again in early 2017 before accelerating this year. In October, the EIA expects Bakken production to hit 1.33 mb/d, a new record high.

In some ways, the Bakken is enjoying a bit of a revival because the Permian has become overcrowded. The pipeline bottleneck, the strain on rigs and equipment, completion services, labor, water and even on road traffic has caused a lot of headaches for shale drillers in West Texas. Some shale executives have decided to shift resources elsewhere, and the Bakken has received a boost as a result.

The Bakken took over as the most profitable place for shale drillers on average this summer, at least temporarily surpassing the Permian. That may not last as the steep discounts for WTI in Midland drags down the profitability of the Permian, a situation that will resolve itself over the next few years as pipelines come online. But the improved outlook for the Bakken is notable nonetheless.

However, despite the resurgence in the Bakken, the basin is starting to suffer from its own strains. Production is still rising, but the crowded field is increasingly pushing shale E&Ps onto the periphery. The result is that the average well in the Bakken is producing less oil at its peak performance, as fringe areas are dragging down the average.

We have to get to the seventh paragraph in his article before we finally read this:

S&P Global Platts reported on the findings, noting that absolute decline is not necessarily likely in the near-term, but that the shale industry will have to ramp up drilling activity by two or three-fold to keep growing production. “The production decline is inevitable, but the timing is uncertain as to how this is going to play out,” Justin Kringstad, director of the North Dakota Pipeline Authority, said in an interview with S&P Global Platts. “The big unknown right now is how much new technology is going to impact the fringe areas of the play.”

The big story Cunningham is missing if he wants to remain the poster child for pessimism: what happens to the Bakken if the Sierra Club is successful in shutting down the DAPL?

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The Book Page

Apologies to all. I had Sophia with me at the library today so didn't have the freedom / time to look for books. I had to quickly pull two off the shelf.

Richard III: A Ruler and His Reputation, David Hospool, 2015. I have to read a biography of the royals every so often to remember their convoluted stories. I won't spend much time on this one but it will be a review. Again.

Captain Cook: A Legacy Under Fire, Vanessa Collingridge, c.2002. A distant relative, George Collingridge, did much to take away some of Captain Cook's legacy. In the process, George Collingridge came under much fire and scrutiny. Vanessa says she is out to tell the "true" story of Captain Cook and her distant relative.

Statoil -- Picking Up The Pace -- September 23, 2018

This is pretty cool. Just yesterday (?) I suggested that Statoil was picking up the pace.

Then I come across this Statoil well, one of the wells on the "original Daddy-Long-Legs" pad (LOL):

• 21815, 4,680, Statoil, Richard 8-5 1H, Banks, t4/13; cum 372K 3/18; went off-line 2/18; back on-line immediately but only for one or two days a month; now apparently back on-line for longer periods of time.

 Production on this well is so incredibly erratic.

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	7-2018	31	7722	7445	7545	30876	25266	5610
BAKKEN	6-2018	2	396	394	489	678	678	0
BAKKEN	5-2018	2	194	187	759	286	286	0
BAKKEN	4-2018	1	46	86	80	140	140	0
BAKKEN	3-2018	5	761	834	3598	5	3	2
BAKKEN	2-2018	10	3034	3330	3380	15421	9566	5855
BAKKEN	1-2018	18	7202	6838	8021	24966	19996	4970
BAKKEN	12-2017	11	7155	7109	5100	17898	12373	5525
BAKKEN	11-2017	1	38	189	267	77	68	9
BAKKEN	10-2017	9	2015	2039	2886	11172	5187	5985
BAKKEN	9-2017	30	9395	9531	9271	32849	32849	0

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The Playboy Page

See this post.

Comments On Wells Coming Off The Confidential List This Next Week -- September 23, 2018

The list is here.

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Newfield

I must be missing something (I usually am). Earlier this year, April 18, 2018, Mike Filloon suggested Newfield just might be the best operator in the Bakken.  Most of the article is behind a paywall, but I have it archived. From the linked post:

Improving well design has continued to increase oil production per well. This has occurred targeting lesser geology, and on pads with producers already completed. These two variables should decrease oil and natural gas production significantly.

Better well design places more resource in contact with the wellbore. The idea is simple. More frac's close to the well bore breaks up more rock. This releases more oil. Operators use to think more production would occur from existing fractures, but production improvements have been accomplished through tighter stage and perf clusters.

So turn the rock close to the wellbore to rubble, and pack with sand. Although this is a general way to look at completion design, it provides and idea as to why operators are more successful at lower oil prices. Newfield is an operator that continues to outperform on a production per foot basis. This is true in all of its plays. While there may be more interest in its SCOOP/STACK leasehold, its Bakken acreage has shown a significant improvement in oil production YOY. This has been accomplished in the face of dwindling core locations, and less productive geology. We expect NFX to continue to outperform going forward, as it's well design may be the best in the Bakken.

Maybe, I don't know. Having said that, Newfield has some incredible wells in South Tobacco Garden. STB is a rectangular 20-section oil field unchanged in size or shape since the very beginning of the boom. It is located in the heart of the Bakken. Any operator who can't report huge wells in this area shouldn't be allowed to drill in North Dakota. LOL. But the free market system will take care of that and wells can always be re-drilled, re-fracked.

It appears Newfield will report four great Orvis State wells. It appears that the Obenour wells sited in this section run south; the Orvis State wells sited in this section run north. Neighboring, older wells to watch:

• 20347, Obenour, running south, off-line;
• 19597, Obenour, running south, off-line;
• 18086, Sergeant Major, running north; just coming back on-line;
• 23207, Orvis State, running north, still off-line;

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Bakken Development

It's fascinating to observe how the Bakken developed. There really was no one operator that "monopolized" the play. Certainly there were a handful of big players, but even those have changed. For example, Oasis did not even exist early in the boom; now, apparently it's the fourth largest producer in the Bakken.

And it certainly wasn't only publicly traded companies. A handful of private companies have been real standouts. I'm thinking of Slawson.

It makes sense how it happened, but it is still quite remarkable. It seems, for the most part, each Bakken oil field is "owned" by one or two "operators" with several others filling in.

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Brooklyn Oil Field

CLR keeps "manufacturing." The 5-second Brooklyn oil field elevator speech: Brooklyn: a small, non-descript field NE of Williston; "owned" by CLR; excellent example of how an operator systematically drilled one entire field with one rig; holding the entire field by production within a year or so; has received the most comments of any field (that was early on). The Brooklyn is tracked here.

It looks like two more Brooklyn wells will come off confidential list this week. It will be interesting to compare new wells with old wells and to see if "over-drilling" in a field is causing problems.

See the "Bakken Factory" below.

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Pad Drilling

For newbies. Oliver oil field is tracked here. Another non-descript oil field north of Williston in an area not expected to be all that productive. But Kraken Operating seems to have done well. Production may seem unremarkable compared to some areas in the Bakken but one must compare these recent results to other Tier 2 and Tier 3 plays in the Bakken, and more importantly, compare these numbers with the production numbers we saw in the best Bakken six years ago. Even Tier 2 and Tier 3 wells are providing some excitement. And look how pad drilling has changed everything: instead of wells coming off the confidential list in drips and drabs, we have the results of a host of wells all at one time.

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Miscellaneous

Oasis has some nice wells in Willow Creek.

Two companies in the Bakken probably know more about the Bakken geology and completion strategies than all the others: NOG (a non-operator) and CLR (an operator, and its CEO, Harold Hamm, the face of the Bakken). NOG participates in wells drilled by operators throughout the Bakken; CLR seems to have wells in every area of the Bakken.

This next week, CLR will be reporting wells from the following fields: Brooklyn, Pershing, Sanish, and Rattlesnake Point.

In addition to drilling throughout the Bakken, CLR is taking the lead on targeting the 2nd and 3rd benches of the Three Forks. For newbies: the middle Bakken is pretty much fully mapped in North Dakota. "They" were just starting to map the first bench of the Three Forks when the Saudi Surge (2014 - 2016) stopped everything in its tracks. A lot of things changed during that time frame. I think we are still seeing a change in "attitude" in the Bakken. Operators remain much more conservative. It appears newer operators are building cash positions -- pad drilling where they know they should do well. But the more established operators, like CLR and Whiting, are starting to drill more wells targeting the second and third benches of the Three Forks. Most interesting, it appears that "we" still have a long way to go to completely mapping the Three Forks upper bench before we even get started talking about the lower benches.

It is my understanding that the Three Forks will have a smaller footprint than the middle Bakken, maybe half as much as the middle Bakken. But well vs well, it's possible the Three Forks upper bench (T1, or H1) will be better wells than middle Bakken wells.

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The Bakken Factory

Re-posting.

Fracking: oil giants use size to overcome fracking challenges; Chevron employs "factory model" to manage shale-drilling operations in remote Canadian region. Williston's own Rollefstad used the phrase "manufacturing phase" years ago, anticipating this. I don't think there is anything of consequence in this article. The Bakken is way ahead of this. CLR led the way in pad drilling and Harold Hamm put a copyright/trademark on "Eco-Pad."

Chevron Corp. is laying the groundwork here for what it calls a “factory model” for shale drilling, master planning an entire region of small shale wells by locking up labor, building infrastructure and securing sand and other needed materials, all at once.
Shale drilling, once the province of small, scrappy operators, has run into growing pains in places such as the Permian Basin in Texas and New Mexico, as producers struggle with pipeline bottlenecks and rising labor and material costs.

Big oil companies seeking to re-create the U.S. shale boom in countries such as Canada and Argentina are trying to avoid these problems by managing shale sites in concert to prevent logistical hurdles and streamline operations, similar to the way they run traditional oil megaprojects.

Already in Texas, there is evidence that larger companies such as Chevron and Exxon Mobil Corp. are weathering the bottlenecks and rising costs there better than smaller rivals—and continuing to ramp up production—because they have the economies of scale and wherewithal to develop their own solutions to these problems.

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Notes To The Granddaughters

Arianna is with her parents in Houston for a state water polo tournament.

My wife is with our other two granddaughters.

Olivia is reading the comics.

Sophia is using her new "window" crayons to draw on the window. If parents haven't seen these "window" crayons, they are very, very clever. Sophia loves them.

I will have Sophia all afternoon while Olivia works on her crafts and other projects. I will watch a bit of the golf tournament. No NFL.

Sunday Morning -- September 23, 2018

I'm awake, but not much yet to blog. But I'm sure I will find something.

Late, late night at Chuck E. Cheese's last night. Long, long story. What appeared to be the worst night possible when we first got there turned out to be, perhaps, one of the best five hours I have ever had with Sophia. Considering all I do with Sophia, and all the things we've done together, that says a lot.

One video, and I'll talk about it later:

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The Literary Page

Years ago when I was really reading a lot -- that was back in 2001 - 2007, and especially during 2002 - 2004. Along the way I picked up the 3-volume biography of Graham Greene by Norman Sherry, vol 1 copyright 1989. (See also this post.)

I do not remember how much of the biography I have read. I know I did not mark up any of the three volumes as I read it.

But last night, I had an opportunity to re-attack, and re-attack I did.

Volume 1 is 725 pages, not including index, table of contents, etc., but the body of the biography itself. I started with Chapter 25, in the year 1929. Graham Greene had just gotten married, and had not yet published a novel. Of all the chapters to re-attack, it seems this may have been a great starting point.

Again, it's a book I can't recommend to anyone. But for an Anglophile and who has spent much time in England it brings back great memories. Graham Greene was a hiker just like me, taking long, long walks to gather his thoughts, as they say, and perhaps, maintain his sanity. He traveled extensively throughout Europe (not particularly unusually for the Brits) and it's "fun" to remember all the places we visited that he mentions. Of all things, for example, Norman Sherry writes a couple of pages on Greene's interest in Trier, Germany.

From the book, page 381:

He was not to visit Trier until a month later before he completed The Name of Action and although, having spent only one night there, he was again moved by its magic: "It's the loveliest place I've ever been to: I think it must have been my home in a previous incarnation" -- his failure to renew his impressions of the town earlier was to be fatal for the novel."

We were stationed in Bitburg, Germany, for seven years (two different tours). Trier was about half-an-hour down the road. If we had nothing planned for any given Saturday, I would always take our two daughters to Trier for hot chocolate and a chocolate croissant at Germany's version of a Starbucks back in those days. The first tour, Laura was six months old when we arrived in Bitburg, and Kiri was a little over three years of age. By the time we left, they were 4 and seven respectively, or thereabouts. We would return to Bitburg three years later.

Lots of Roman history in Trier.