Lynn Helms, director of North Dakota’s Mineral Resources Division, said one of the best things to come out of the U.S. Geological Survey (USGS) assessment more than doubling the agency’s estimate of oil reserves in the Bakken-Three Forks oil and gas field is the confidence the news will give investors in the commercial and housing markets of western South Dakota and eastern Montana.
During a recent conference held to release and discuss his monthly update on drilling and production trends in the Bakken Shale, Helms said the revised USGS estimates are no surprise to producers and other people directly involved in the play and noted that the maximum range of the USGS estimates reach the mean level of the state’s estimates.
“It’s a conservative estimate of the reserves in the Bakken-Three Forks basin,” Helms said. “And those numbers don’t reflect the estimated one billion barrels we expect from wells already in production.”
Helms said North Dakota last conducted an assessment of the Bakken reserves in 2010 and added, “Our intention is to wait until next year when this exploration phase is nearer completion.
“We think the USGS did a good job with the amount of data they had available. It was nice for that data to come out,” Helms continued, and especially nice that the numbers doubled. “It gives a boost to the long-term investment prospects in western North Dakota.”
Helms said the study should encourage investors to launch the commercial businesses and housing projects needed to keep up with the burgeoning workforce in the Bakken region.
“This is not a play that’s going to fall off the shelf in 2017. This reinforces that this is going to be a 15- to 20-year drilling program just to get at the 7.4 billion barrels,” Helms said, referring to the USGS estimate that producers have not yet tapped.
Although the rising estimates of the reserves are good news for exploration and production companies in the Bakken field, North Dakota officials say bottlenecks in the completion services sector and in midstream services remain as big hurdles for the industry.
As of this week, Helms said, there were 440 wells drilled and waiting on completion services. Weather is the most common factor in the North Dakota field, with impassable roads and bitter temperatures slowing or stalling the fracking crews and equipment needed to free the oil and gas from the shale formations.
In addition to the weather, completions are also lagging due to shortages of fracking crews and workover rigs in the Bakken field.
“The average is still 110 days between the start of drilling and completion,” Helms said. “The industry would like to see the time from spud to completion come down by half, to 55 days.”
Even operators with producing wells are still facing the challenges of working in an underdeveloped field. During his segment of the recent press conference, Justin Kringstad, director of the North Dakota Pipeline Authority, said, “Our biggest challenge is to get the gas we are producing to the processing plants.”
He said the infrastructure is still trailing the demand, however, and noted that flaring of natural gas remains at 29 percent across the Bakken field. He said 17 percent is flared at wells that do not have access to collection pipelines and 11 percent is flared at wells that have access, but have issues on the lines they are tied to. There are a number of companies working to extend the collection system so less gas will be wasted with flaring. There are also five new gas processing plants under construction, bolstering the midstream facilities in the region.
Kringstad said work is also under way on both collection systems and rail facilities to carry crude oil and gas liquids out of the remote Bakken region and deliver it to refineries where producers can get the best price for their product.
Ron Ness, president of the North Dakota Petroleum Council, said the development and expansion of rail loading facilities will be key to opening key markets for Bakken producers. “The biggest change we’ve seen is the emergence of rail which is letting us get oil to the coasts now and get a better price for our product,” he said.
Infrastructure at both ends of the rail lines serving North Dakota are helping shrink the price differential between oil produced in the Bakken field and international oil trading at Brent prices, said Kringstad. Major players in refining have been building or upgrading their rail facilities for receiving the Bakken oil while key midstream players have been opening modern, high-volume rail loading facilities in North Dakota to facilitate the loading of tankers. As collection systems are developed to move the oil directly to the rail hubs, Kringstad said producers should be able to circumvent some of the problems created by the winter climate on the northern plains.
Although much of the potential in the Bakken-Three Forks basin is yet to be tapped, Ness said producers have developed enough experience in the field that many have reached a stage where they are “focusing on production and efficiency” rather than exploration.
Producers are working constantly to extract the most gas and oil they can from each well. “We’re still getting a very, very small percentage of it,” Ness said. “It’s essentially like a big research lab out there because the Bakken is different than any other play. It’s really amazing how the technology is evolving.”
Ness said the industry is making big steps forward in developing completion techniques as well as finding ways to make complete use of the rich liquids coming with the natural gas.