How Important Is That Natural Gas That Is Being Flared Off In North Dakota? -- The Bakken, North Dakota, USA

Or to ask the question another way, how valuable is the oil being produced from the Bakken?

On the books, there is currently $1 - $3 billion in projects to capture that natural gas that is currently being flared.

The natural gas flared in North Dakota comprises about 4 percent of the value of the production and about 7 percent of the BTU'S the wells are producing. If you produce a barrel of oil from the Bakken, you have $80 worth of oil and roughly $6 worth of gas. North Dakota's tremendous growth of home-grown domestic energy is possible because we are able to begin production of oil in advance of the gas gathering systems and gas pipelines being completed, often a natural course in resource development. No one wants to capture the value of the natural gas more than the operators, so they work hard with industry partners to get the necessary infrastructure in place as quickly as possible.

Just putting things into perspective.

"All that natural gas" you see flaring accounts for "about 4 percent of the value of the production and about 7 percent of the BTU's the wells are producing." And you know the numbers were rounded up under the rosiest scenarios. As the price of oil heads back to $100/bbl and the price of natural gas remains where it is (or decreases), that "4 percent" decreases.

I look forward to the natural gas gathering projects, not so much for the reasons stated above, but for the jobs these projects will provide.

By the way, if you drive through an oil field with flaring all around you, what does that do to the local temperature? According to a local farmer, the temperature, based on the thermometer off his Ford pickup, went up about three degrees as he drove through a heavily flared oil field. Something tells me the wildlife will come to appreciate those flares come January, February, and March. The wildlife along the Alaskan pipeline has proliferated during to the warmer terrain around the pipeline.

Prudhoe Bay, about 50 miles west of the Arctic National Wildlife Refuge, the number of caribou has quintupled since production began in early 1978. The caribou often use the oil field equipment and the adjoining Alaskan pipeline for a windbreak and warmth. Much of the year the temperature in this region is a frigid 40 degrees below zero.

In New Mexico oil fields, many species of wildlife use equipment in a productive manner. Birds will use elevated surfaces as foundations for nests. Deer, like caribou, use the equipment for a windbreak and warmth.

Something tells me hunting is going to be heavily restricted once western North Dakota is dotted with oil wells. The wildlife will love it.

The natural gas gathering projects will make us all feel good, but the pipelines that really need to be laid, are those that would decrease the truck traffic.

Just How Good Is The Bakken -- A Reminder and a Utica Update -- The Bakken, North Dakota, USA

This link about the Bakken TOC was posted May 24, 2010. By then, the Bakken boom had begun, but investors and entrepreneurs still had the opportunity to get in near the ground floor, as they say.

The higher the total organic carbon (TOC) in the source rock, the better the formation.

TOC: total organic content -- this has to do with the "source rock" -- the rock that generates the oil. Look at this definition of TOC from the Schlumberger website:

A rock rich in organic matter which, if heated sufficiently, will generate oil or gas. Typical source rocks, usually shales or limestones, contain about 1% organic matter and at least 0.5% total organic carbon (TOC), although a rich source rock might have as much as 10% organic matter. Rocks of marine origin tend to be oil-prone, whereas terrestrial source rocks (such as coal) tend to be gas-prone. Preservation of organic matter without degradation is critical to creating a good source rock, and necessary for a complete petroleum system.

Note that the Bakken source rock has 11% TOC. [If you want to see this data for yourself, go to this link: https://www.dmr.nd.gov/ndgs/bakken/bakkenthree.asp; then, scroll down to GI-2. The fifth presentation "Bakken TOCS" is what you are looking for; click on "PDF 52 Meg" -- due to the size it will take a few moments to download. Incredible numbers; even an amateur can see the TOCs -- but there is a lot more than TOC, but it's a start.]

So, what's the TOC in the Utica? Verbatim excerpts from this link (pay particular attention to Point Pleasant and Utica references):

The final isolith map includes the thickness of all organic-rich beds, shale beds and interbedded limestones from the top of the Utica Shale to the bottom of the Logana Member of the Lexington Formation in Ohio; the Logana Member in eastern Kentucky and West Virginia where the Point Pleasant and Utica are not present; and the interval from the top to the bottom of the Utica Shale where only the Utica is present in Pennsylvania, Ontario and New York ...

Data for total organic carbon (TOC) were overlain ...

Adding these data defined areas .. indicates that nearly the entire assessmetn area is in the good to very good range. Exceptions are thin, linear, northeast-southwest trends of fair to poor TOC values along the Ohio River between West Virginia and Ohio and smaller, parallel trends farther west in Ohio; and ...

The map of minimum TOC values presents a more pessimistic picture. Small areas in Ohio, Pennsylvania and New York are deemed to be very good and occur within a much larger area of these same three states that isin the good range for TOC. However, southern Ohio and most of West Virginia is mapped as having mostly poor potential.

... TOC data from 28 deep wells in the basin indicate that in 11 of the 28 wells, TOC values were greater than 0.5% [not a typo; 0.5%; compare to 11% for the Bakken] in the Beekmantown Formation and deeper formations. The highest values are 4.4% from the Rogersville Shale ...2.83% and 1.12% from the Conasauga Formation ... Other TOC values range from 0.57% to 0.88%. [Again, compare these numbers with the Bakken].

When you get to the maps, the "very good" areas generally have a minimum TOC of 4% and less.

The relatively lower TOC's compared to the Bakken, are counterbalanced by the very thick Utica, measured at 100 to 150 feet, and as thick as 500 feet at places. An undated article at Geology.com states that not much is known about the true TOC of the Utica.

Having said that, I believe the Lodgeple to the Bakken (three sub-formations) and the Three Forks (several sub-formations) is also 100 - 150 feet thick in the better Bakken.

The TOC in the Bakken is quite simply, incredible.

Flyer For the Commercial Park -- Fiver (5) Miles North Of Williston -- the Missouri Ridge Commercial Park -- The Bakken, North Dakota, USA

I am correcting this posting, see first comment below. I was wrong with my original posting regarding this flyer. This is NOT the Bakken Industrial Park being developed by Granite Peak. This is a new development to me. It is one mile north of the Truck Reliever Route, the bypass at the Epping turn-off.

The big question is who has the 70-acre parcel in the Missouri Ridge Commercial Park.

This is not the Bakken Industrial Park. The BIP is one mile south at the Epping turn-off.

Photos of the Lucy Hanson Well East of Williston Posted -- The Bakken, North Dakota, USA

Link here.

Sunday Morning Musings -- News and Highlights -- Idle Ramblings -- The Bakken, North Dakota, USA

1.  This puts the Bakken into perspective. Manhattan (New York) rents moving from $2,500 to $5,000 for an apartment.

2. Huge story in Bismarck Tribune about CCS Midstream. I posted when they first came to Williston not long ago.

3. I guess along with the rest of the nation, the Minneapolist Star Tribune finally heard about the Bakken; at least two in-depth articles, this is the first. A quick glance at the first article does not suggest anything new to those who have been following the Bakken, but based on what I've seen, most for most folks in Minnesota, the Bakken is still new to them.

4. The Chinese will compete with GE and Denmark's Vestas and others to produce whooping crane killers. This will be entertaining to watch.

5. This story is reported many different places, this one from the Anchorage Daily News.

North Dakota will likely leapfrog California and may even overtake Alaska in the next year -- far outpacing earlier industry predictions -- to become one of the nation's three biggest oil-producing states, a government regulator said.

6. I think I've linked this one before: feature article on Chesapeake Energy's CEO, Aubrey McClendon. Chesapeak Energy is now #2 behing ExxonMobil in natural gas production.

Erudite and confident, with rimless glasses pinned to a face that looks far younger than his 52 years, McClendon is charming. And he’s not shy about spending money. Professionally, he’s combined those attributes to stunning effect, building Chesapeake Energy into the nation’s second-biggest producer of natural gas after ExxonMobil, pumping 3 billion cubic feet per day out of the 13.7 million acres it controls—a landholding roughly equivalent to West Virginia.

If the article mentions the Bakken, I missed. According to CHK, the company left North Dakota prematurely, and is now coming back in. The jury is still on whether it will succeed in its stated strategy to tackle the Williston Basin differently than the others already here.

I've always said the "business of the business" is what is important for investors, and Forbes notes that:

The accounting method also hides mistakes—like the $325 million Chesapeake spent buying land in Michigan in 2010, thinking that it had found a hot new play. It hadn’t. Chesapeake now faces 100 lawsuits for trying to back out of some leases.

Even when the company finds gas, it sometimes doesn’t pay to drill. For instance, the company needs natural gas prices of only $2.25 per thousand cubic feet to break even in the Marcellus (prices are currently around $4). But in Louisiana they need $3.50 and in Texas, $4.50. Yet McClendon’s crews have been drilling at a breakneck pace in the latter two, even at a loss.

Why? Use it or lose it: Chesapeake must contractually sink at least one well on each leased section within three years or forfeit the rights. Extrapolate this across the nation’s gas plays and it’s easy to see why prices may stay low and why McClendon’s land machine, the heart of Chesapeake’s greatness, could take the company over a cliff.

7. More to follow, perhaps. But this may be the best of those I've seen this weekend, an article in SeekingAlpha, "Seven Energy Stocks to Buy Before Oil Hits $115." If oil is programmed to hit $115 and average $115 for the calendar year 2012, I can think of 150 companies you may want to consider, starting with NOG and working on up from there. The seven suggested by the contributor linked above: XOM, COP, EOG, RIG, MRO, NBL, and HOS. To those I would add, in no particular order: CRR, BHI, SLB, HAL, NOG, KOG, CLR, WLL, BEXP, CVX, ENB, ENC, and the rest of those listed at earnings central. And folks express wonder at some of the things I post. Hmmm.