Interesting oil article

[Beau Geste (imported)]

This is the formation from which petroleum is extracted in the Elm Coulee Field, the reserves for which were recently recalculated at over 4 billion barrels, which would make it the second or third largest oil field in the 48 adjacent states. The 500 billion reserve figure is unlikely, although there could conceivably be 100 billion barrels in place in the Bakken Formation, which covers an area larger than California.

http://archive.bigskybusiness.com/index ... e&sid=1504

Of course, there are other large oil reserves which can't be extracted. And geologists have known for sixty years that an enormous amount of oil was formed in the Williston Basin in the Paleozoic.

One of the really interesting things about development of the Elm Coulee field, is the fact that the wells are drilled downward over 8,000 feet, an elbow or some similar directional device is fixed in place, and the hole is then continued horizontally in the formation for over a thousand feet--it's possible this technique could be used in other formations with thin pay zones.

Unless it actually is as big as Price thought, production from this resource isn't large enough to reduce the cost of gasoline.

[Arab Nights (imported)]

Neat article. The basic problem with future projections is that they are a straight line projection of the present. As this article shows, a few people with brains and perserverence can chuck straight line projections out the window.

[Riverwind (imported)]

and as for the cost of oil, look to wall street.

River

[kristoff]

TEXT OF ARTICLE

Please, no more text links without the text. Give both please, or I am going to start deleting them again. Stale links provide for meaningless posts.

Kristoff

More OIl? Speculation Tantalizes Oil Explorers

Posted by Editor on Saturday, February 03, 2007 - 03:54 PM 1443 Reads

By Evelyn Pyburn

The 2007 Energy Outlook report, to be officially released later this month by the Energy Information Administration (EIA), will be significantly different from that of last year -- due in part to activity in Eastern Montana oil fields. It is another event, in a chain of events, that is increasingly drawing world attention to this spot on the map, as speculation runs high about what the future may hold.

In the EIA report, advancing technology and higher resource assumptions about the Bakken formation in the Williston Basin, in Montana and North Dakota, will boost predictions of US crude production through 2030.

Upward adjustments of resource estimates for the Bakken are nothing new; analysts have been ratcheting them upward ever since the first study of the field in 1974. But since 2000, the predictions have been staggering; some experts have suggested that the Bakken may harbor the greatest discovery of oil in the US since Prudhoe Bay.

Much political pressure has been brought to bear for Congress to authorize a study by the US Geological Survey to re-examine a controversial theory that says there may, in fact, be more than 500 billion -- "that's billion, not million" -- barrels of oil in the Bakken. To give that some perspective -- all recoverable oil in the US is estimated at 21.4 billion. In Saudi Arabia it’s estimated at 264 billion barrels.

The EIA Report

US Crude oil production, in the 2007 EIA report, is projected to increase from 5.2 million barrels per day in 2005 to a peak of 5.9 million barrels per day in 2017, primarily as a result of increased production offshore in the Gulf of Mexico. Production is then expected to fall to 5.4 million barrels per day by 2030.

In 2006, EIA projected much steeper declines from 2017 to 2030. They predicted crude oil production to fall from a slightly lower level of 5.8 million barrels per day in 2017, to 4.6 million barrels per day in 2030.

The 2007 report assumes a 16 billion barrel increase in US production because of the application of new technology. The eleven percent increase is expected to be produced using carbon dioxide injection into the rocks, according to energy expert, David J. Bardin, Counsel to Arent Fox Kinter Plotkin & Kahn, PLLC, who is also a former Deputy Administrator of the US Department of Energy.

Although the EIA doesn't break it down, Bardin attributes 3.6 billion barrels of that increased production specifically to the Bakken oil formation, for which he recently said, "ROIP (remaining oil in place) estimates run as high as 500 billion barrels."

The 200,000 square mile Bakken Formation is a "source rock" that has been termed as "tremendous," "unique" and "world class." It lies within the Williston Basin, under the Eastern third of Montana, much of North Dakota, and some of South Dakota. It contains three of the nation's largest oil fields.

Bardin has been urging the EIA to re-evaluate their assumptions for crude oil projections for quite some time. Bardin has called the EIA's estimates "extremely cautious assessments." He has written that the estimate of total US technically recoverable crude oil resources on which EIA relies (175 billion barrels) included barely 2 billion barrels in continuous type deposits such as the Bakken," while studies are suggesting that there is more than 200 billion barrels of technically recoverable resource in the Bakken alone.

Steven Grape of the EIA reported that "A new assessment of the entire basin, due out in about a year, will provide an updated USGS estimate of the technically recoverable oil resources in the Bakken Formation. If the formation's potential bears out, this could (depending on recovery factors) increase the estimate of technically recoverable crude oil resources in the United States by billions of barrels."

The study will focus on oil and gas resources in western North Dakota. And, while it will include the work of numerous studies, it will also build upon the work of the one study about which most of the controversy swirls, that of Dr. Leigh Price, formerly of the US Geological Survey in Denver.

The Study

While there have been numerous studies which have resulted in increased projections in The Bakken, Dr. Price was the first to hint that there was some serious oil in 'them thar hills.'

Described as a "well respected organic geochemist whose primary research interest was the Bakken Formation," Dr. Price, using a different approach, challenged previous assumptions about the Bakken. Employing a more complete database, Dr. Price came to the conclusion that the Bakken was capable of generating an average of 413 billion barrels. What's more, he believed that as much as 50 percent of it is recoverable -- an important consideration since there are vast oil reserves in the world which are not calculated into any projections because their recovery is beyond the reach of technology and economics. The projections from other scientists about recovery from The Bakken have been far more conservative, with some saying only 3 percent would be recoverable reserves -- but even at that we are talking about a lot of oil -- it would eclipse Prudhoe Bay.

The controversy about Dr. Price's research might have been resolved long ago if it were not for his untimely death in 2000. While he wrote a paper about his findings, which was sent out for peer review prior to his death, it was never "published" as protocol would require, and the USGS shelved the study.

Fellow scientists have been pushing for the publication of Price's unpublished manuscript. The manuscript "contains valuable information," said Julie LeFever of the North Dakota Geological Survey, and Lynn Helms, director of the North Dakota State Department of Mineral Resources, in a report on Bakken Reserve estimates. "It should be left to the geological community to determine whether or not they will accept interpretations presented within the report," they wrote.

Bardin, too, urged the publication of the manuscript. Having obtained a copy of it, however, he has posted it with free download on the internet. (http://www.undeerc.org/price/)

LeFever and Helms explained that it is Dr. Price's methods, being "different from the traditional petroleum geochemical practices," that are under dispute. But they conclude that while the "methods used by Dr. Price are beyond the expertise of the Geological Survey to review," ..."'his paper appears solid." "Use of North Dakota Geological survey and Oil and Gas division data along with considerable input from staff geologists adds to the credibility of the geological portion of the model," write the two geologists.

Other studies and a growing database of The Bakken have tended to bear out that there is more resource in The Bakken than anyone previously believed. A computer modeling with extensive data input supplied by the ND Geological Survey and Oil and Gas Division "places the Bakken generated value at 200-300 billion barrels of oil," according to LeFever and Helms. LeFever puts the figure at 200 billion barrels.

The Bakken has a tremendous source rock said Dr. Price and he believed "the lowest possible number [in reserves] to be 271 billion barrels with an ultimate ceiling of 503 billion barrels of oil." And, the oil is not just any oil -- according to Dr. Price, it is "among the highest quality oil in the world."

Dr. Price said that study of The Bakken is unique in many respects. Having been discovered late, it has "unrivaled sample bases." Because of that data, "We know for a certainty, that none of this Bakken-generated oil has been lost from the basin."

"All this generated oil remains in the Bakken shales and in the rocks adjacent to them at relatively shallow burial depths (9,000 to 11,500 feet). This is a given. There is no other basin worldwide, where we may presently draw this conclusion. This certain knowledge that 413 billion barrels of in-place oil exists in the Bakken Source System rocks in the Williston Basin presents the oil industry with an unparalleled 'exploration' opportunity,'" wrote Dr. Price.

That's a lot of oil, points out Jim Halvorson with the Montana Oil and Gas Board. It would take up a huge space. Four hundred billion barrels of oil would cover 50,000 square miles one-foot deep. Not to doubt the work of some very smart people, said Halvorson, but "That's why I have some skepticism." One would think it would have been found by now if it were there.

Halvorson is not alone in his cautious assessment. The fact that the "lofty" predictions have yet to be proven, is why the big oil companies have remained aloof. Most of the production in the "Bakken play" is being done by 13 relatively small oil companies.

Findley's Genius

But, increasingly, people are finding more oil. No one less than Richard Findley, Billings, who was honored this year by his industry with the American Association of Petroleum Geologists "Outstanding Explorer Award" for his discovery of the Elm Coulee field in Richland County, Montana, and for his perseverance in applying technology to claim its elusive resource. Findley estimates that Elm Coulee will eventually produce 200 million to 250 million barrels of oil.

According to Tom Richmond of the Montana Oil and Gas Board, with 20 rigs running constantly, Elm Coulee has doubled its production for the third year in a row, producing an average of 50,000 barrels of oil per day. In September it produced 54,000 barrels of oil per day.

The EIA lists the Elm Coulee Field as the 24th largest oil field in the US, comparable to smaller satellite fields on the north slope of Alaska, according to Grape.

Bardin said it's the "largest onshore discovery in the lower-48 states in half a century; it is still growing."

The Wall Street Journal termed it the "highest-producing onshore field found in the lower 48 states in the past 56 years."

The Wall Street Journal told Findley's story in a huge front page article on April 5, 2006. When oil prices dropped to $8.50 a barrel in 1997 and all the big oil companies left, Findley remained a believer in The Bakken. Targeting a promising area, 12 miles long and 50 miles wide, and going it alone, Findley picked up leases cheap and began putting together investors willing to take a risk. They included Lyco Energy Corporation of Dallas and Halliburton of Houston. (Lyco was acquired last year by Enerplus Resources Fund of Calgary for $421 million.)

Wrote Grape in a recent paper, "The recent, highly productive oil field discoveries within the Bakken Formation did not come from venturing out into deep uncharted waters heretofore untapped by man, nor from blazing a trail into pristine environs never open to drilling before. Instead, success came from analysis of geologic data on a decades-old producing area, identification of untapped resources, and application of the new drilling and completion technology necessary to exploit them."

Fellow Billings oilman, Steve Reger, Montana Oil Co., explained Findley's genius. The Bakken is made up of three "members;" the top and bottom being oil-bearing shale and the middle a thin layer of "silt and broken rock," which was for the most part ignored by other developers. Findley doggedly adhered to the basics of oil exploration and determined for himself that there was a "sea" of oil in that overlooked layer in the middle; it would just have to be extracted in a different way.

According to Reger, vertical drilling isn't effective in tapping into a layer that ranges between only six and 16 feet thick. With a traditional well, a little bit of pumping within that layer and it is all gone. But if you drill horizontally through the 10-foot layer, you can look for what is called "the sweet spot." And, then if you do what Findley did, you improve upon production even more. He lined up some 40 trucks to pump, under high pressure, a mixture of water and sand which fractures the middle “member” of the Bakken. The sand holds the fractures open and allows the oil to flow into the pipeline, increasing production substantially.

While most of The Bakken lies under North Dakota with only about a third of it extending into eastern Montana, Findley discovered that the middle layer of The Bakken, at Elm Coulee in Montana is somewhat different than the rest, in that it has all of the three attributes that are most conducive to optimum oil production. The middle layer was the "thickest," at this point, and it had the most permeability or "porosity." It also had the greatest "resistivity,” which is the resistance to the passage of an electrical current— which means there is probably oil in the rock.

For these reasons, said Reger, about 98 percent of all the wells drilled in what's come to be called the Fairway are successful. There's almost no such thing as a dry hole -- another huge enticement for explorers because drilling a well -- successful or not -- costs about five million dollars. At that price no one wants to be wrong very often.

"This Bakken deal is incredible," enthused Reger. Not only is technology opening up more reserves on almost a daily basis, but the quality of the oil is about as pure as it gets. "It's about the color of honey and smells sweet," said Reger, adding that it is being used to mix with the heavy Canadian crude to fetch higher prices.

What the recoverable reserves are is an unknown, and determining that will be a moving target, because, according to Reger, "they are changing their technologies every month. There are new techniques all the time."

"Every well is different. It will flow for a month and some six months. They haven't had enough time to prove it yet, but there is speculation that wells that are coming in at a thousand or 2000 barrels a day will dwindle to 100 or 200 barrels a day and stay that way for 25 or 30 years," said Reger.

"And the same thing is happening in North Dakota. Dunn County and surrounding counties have produced some good wells. These wells are costing an average of $4.2 million to $5 million to drill and complete," said Reger.

"I think The Bakken is going to be great for Montana and North Dakota because it is going to generate so much money for both states," said Reger.

The Bakken

As a producer of oil, Montana ranks 11th among the states. It produces a total of 3.1 million barrels of oil annually, or 90,000 barrels a day, according to Richmond. The state ranks ninth in crude oil reserves, with 364 million barrels.

Montana reported a net increase of 63 million barrels of crude oil proved reserves in 2005. Montana's production also increased by 37 percent from 22 million barrels in 2004 to 30 million barrels in 2005.

Oil production in Montana has doubled over the last three years, according to Richmond , and almost all of that increase is due to the application of horizontal drilling in the Bakken, most particularly in Elm Coulee.

From 1999 to 2005 crude oil proved reserves have increased 105 percent in Montana, and 59 percent in North Dakota. Proved reserves are expected to increase as operators gain more knowledge and experience completing wells in the Bakken, according to Grape.

Discovered in 2000, Elm Coulee has grown to 529 square miles and produced 15 million barrels of oil in 2005. Headington Oil Company, one of the two largest operators in the Elm Coulee Field, estimated that the in-place resources of the field are 5 million barrels per square mile.

Higher oil prices over the past few years, having increased from $20 a barrel to $55 a barrel, have helped to spur production of oil in Montana and justify the increased cost of technology. Helping also has been state tax incentives, which help to offset higher production costs.

According to Halvorson, the good news is that the risks associated with horizontal drilling have proven not to be as high as was first thought.

High oil prices have moved the rate of production in the Elm Coulee Field, along at a faster pace. "It's a big enough reserve that they probably would have drilled no matter what, but it would have peaked later," explained Richmond. Production would have been paced slower, were it not for the higher prices attainable now. The higher prices are also inducing the continued production from wells that probably would have been closed much sooner."

But higher prices for crude oil are tempered by higher costs. "Drilling costs have gone up as much as oil prices," said Richmond. "They have tripled. Competition is fierce for the contractors who are available, so they know they can charge more, and they do."

Intense production has distracted somewhat from exploration. There have been some new discoveries in traditional vertical wells, in a deeper reserve called Red River. But for the most part they are not being pursued because all the development resources are being consumed by production in The Bakken. "They will come back to them later," said Richmond.

Why Studies are Important

Establishing the future potential of the Bakken is important, not only to attract investment for exploration and development, but also to promote the development of pipeline capacity.

With existing pipeline filled to capacity at 100,000 barrels a day, it is "maxed out," according to Lynn Helm, and that serves as a serious barrier to future production.

"As production in Montana and North Dakota increases, the existing transportation system is becoming a bottleneck," writes Grape, "The existing pipeline system for the Williston Basin area, which is also used for movement of imported Canadian tar sand oil, if fully utilized. Rather than sell oil at a discounted price to get it into the pipeline, some US operators have announced shut-ins and postponements of drilling."

In September, the North Dakota Public Service Commission approved the site of a 52-mile oil pipeline that parallels a stretch of existing oil pipeline in northwestern North Dakota. Enbridge Pipelines North Dakota LLC already has approval to install larger pumps along the existing line. It is hoping to increase capacity by at least 30,000 barrels per day by the fall of 2007.

[MacTheWolf (imported)]

Wow, I never knew the sister was so long winded. It must take a tremoundous chest to achieve that... at least a FFF cup

[A-1 (imported)]

Wow, I never knew the sister was so long winded. It must take a tremoundous chest to achieve that... at least a FFF cup

NAW!

...not really,

...she is just a little "...cut and pastey..."