I keep seeing mention of this mysterious entity in the oil world, the Bakken oil field, and how it has A Lot Of Oil. What’s going on here? Is this just another case of an oil field being hyped beyond all reasonable bounds, as with other finds we’ve heard about in recent years, or is it truly a game changer? As with many such examples, the truth is somewhere in between, and the more you look into this specific example the more the entire world’s oil situation reveals its complexity.

As explained in Technology-Based Oil and Natural Gas Plays: Shale Shock! Could There Be Billions in the Bakken? (9 page, 358KB PDF), written by the US Dept. of Energy in November 2006:

The Williston Basin is in the north central United States, underlying much of North Dakota, eastern Montana, northwestern South Dakota, and southern Saskatchewan and Manitoba, Canada (Figure 1 [see original document]).

The Bakken Formation can be encountered throughout the Williston Basin. It is 11,000 feet deep in the depocenter (see Glossary) of the basin in the southwest corner of North Dakota. The depth of the Bakken rises to 4,500 feet deep on the eastern edge of the basin, and up to 3,100 feet deep (950 meters) on the northern edge, across the Canadian border in Manitoba and Saskatchewan.

The Bakken Formation was formally described (named) by geologist J.W. Nordquist in 1953. His samples came from the Amerada Petroleum - H.O. Bakken #1 well on the Nesson Anticline in Williams County, North Dakota. Henry Bakken was the surface owner where the well was drilled.

The current U.S. development activity in the Bakken Formation is located in Richland County, Montana, and McKenzie, Golden Valley, and Billings Counties, North Dakota. The largest discovery to date within the Bakken Formation is the Elm Coulee Field of Richland County, Montana.

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Discovered in 2000 and now grown to 529 square miles, the Elm Coulee Field produced 15 million barrels of oil in 2005. It now accounts for almost 50,000 barrels of oil per day, about half of Montana’s crude oil production (Figure 2 [see original document]). This level of production would not have been attained without application of the most recent horizontal drilling and completion techniques.

OK, you may well be asking–but how much oil is in the whole field, and how much of it can we expect to get out? From the same US DOE document:

With new horizontal drilling and completion technology taken into account, the technically recoverable resource base for the entire Bakken Formation is potentially much larger. A recently published study by USGS scientist Leigh Price provides estimates ranging from 271 to 503 billion barrels (mean of 413 billion) of potential resources in place. If the 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. For perspective, consider that the current estimate of all technically recoverable crude oil resources in the United States, not including Bakken oil resources, is 174.67 billion barrels.

That’s a lot of oil, by any measure. For the sake of context, the world currently uses roughly 30 billion barrels of oil per year, so reserves of 400 billion barrels is about 13 years of supply. Well, not exactly. Notice that this is oil in place, not recoverable reserves, which are typically only about one third of the oil in the reserve, and that assumes that reality cooperates with our desire to pull oil out of the ground quickly and cheaply, something that happens less and less often.

Later, that same document points out:

Although operators and the USGS have known about the resource potential of the Bakken Formation for many years, several factors made it very difficult to produce these resources. Early drilling in the Bakken Formation targeted the shale members. Success in these efforts hinged on connecting conventional vertical wellbores with an existing natural fracture system while not ruining the wellbore in the process with introduced drilling fluids. The shale itself is highly reactive with water and swells when exposed to it, which can seal off a productive fracture system. Also, the Bakken Formation contains iron pyrite within its sediments. This mineral forms an iron hydroxide precipitate (Figure 9 [see original document]) when exposed to hydrochloric acid, and there are reported cases of this phenomenon causing irreparable well damage. These challenges reduced the likelihood of success and discouraged most operators from trying to produce oil from the Bakken.

As anyone who’s taken an economics course knows, a widget here isn’t the same as a widget there–you not only have to get the oil out of the ground, you have to transport it to where it can be refined:

Price and pipeline capacity issues could hinder continued acceleration in the development of the Bakken Formation. As production in Montana and North Dakota increases, the existing transportation system is becoming a bottleneck. The existing pipeline system for the Williston Basin area, which is also used for movement of imported Canadian tar sand oil, is fully utilized. Rather than sell oil at a discounted price to get it into the pipeline, some U.S. operators have announced shut-ins and postponements of drilling. The States of Montana and North Dakota are both actively working with operators and pipeline companies to address the issue of capacity shortages. In May 2006, Gov. John Hoeven of North Dakota hosted a summit with legislators, oil industry officials from both the United States and Canada, pipeline companies, producers, and railroad officials to help address the challenge of increasing oil pipeline capacity in western North Dakota.

What does North Dakota have to say about Bakken? See Bakken Formation Reserve Estimates (6 page, 26KB PDF), written by Julie LeFever and Lynn Helms of that state’s Department of Mineral Resources, apparently in July 2006, according to the date in the file name. From their “Discussion” section (emphasis added):

The methods used by Price to determine the amount of hydrocarbons generated by the Bakken are different from the traditional petroleum geochemical practices and are under dispute. Previous estimates were determined directly from available data and did not take into account the changes that had already occurred within the rock. These estimates are calculated from the area (measured) times the thickness (measured) times the total organic content (TOC, measured by RockEval pyrolysis in the laboratory) times the percent of organic carbon that has been converted (measured by RockEval). Price used a more complete database and re-calculated the data based on what he considered more realistic input parameters. The reasons for these adjustments are beyond the scope of this review; however his methods appear to be supported by the data and adequately explained. He estimated that the Bakken was capable of generating between 271 and 503 BBbls of oil with an average of 413 BBbls. Price also re-calculated the data previously presented by Schmoker and Hester (1983) and Webster (1984); the re-calculated values also fall within the range stated above. These values combined with the idea that the oil has not migrated from the Bakken is what is under dispute. Price also states that 50% of this oil is recoverable (on average, 200 billion barrels of oil).

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New estimates of the amount of hydrocarbons generated by the Bakken were presented by Meissner and Banks (2000) and by Flannery and Kraus (2006). The first of these papers tested a newly developed computer model with existing Bakken data. Data used was not as extensive as some of the other studies mentioned in this discussion therefore estimates of generated oil presented were 32 BBbls. The second paper by Flannery and Kraus used a more sophisticated computer program with extensive data input supplied by the ND Geological Survey and Oil and Gas Division. Early numbers generated from this information placed the value at 200 BBbls (pers. comm. Jack Flannery, 2005). Estimates had been revised to 300 BBbls when the paper was presented in 2006. Even if the lower value of 32 BBbls is correct, the amount that may be potentially recovered from the Bakken is significant.

How much of the oil that has been generated is technically recoverable is still to be determined. Price places the value as high as 50% recoverable reserves. A primary recovery factor of 18% was recently presented by Headington Oil Company for their Richland County, Montana wells. Values presented in ND Industrial Commission Oil and Gas Hearings have ranged from 3 to 10%. The Bakken play in the North Dakota side of the basin is still in the learning curve. North Dakota wells are still undergoing adjustments and modifications to the drilling and completion practices used for this formation. It is apparent that technology and the price of oil will dictate what is potentially recoverable from this formation.

So, where does all this leave us?

• Bakken seems to have an undeniably large amount of oil in place, approximately 400 billion barrels.
• The amount of that oil that’s technically recoverable is open to wildly varying estimates, from 3% to 50%, or 12 to 200 billion barrels.
• How quickly can the oil be produced? Even assuming that the transportation issue is solved, which it surely would be with billions of barrels of oil hanging in the balance, it’s not at all clear in anything I could find what kind of technical hurdles would have to be overcome to move from exploratory wells to, say, a couple of million barrels/day.
• Similarly, it’s anyone’s guess how quickly that production could ramp up to whatever level is feasible.
• Bakken seems to be a near perfect example of the dual effects of rising market prices and advancing technology making a previously known (discovered in 1953, remember), but only marginally developed, oil and natural gas reserve suddenly far more attractive.
• As for what Bakken means in the context of the peak oil discussion, it is what it is, as they say on at least one reality TV show. If in the coming years it turns out not to produce much oil per day, then it will have no discernible effect on projections of when the peak arrives or how tightly the oil crunch will squeeze us. If we are indeed on path for a 2011/2012 peak, then it’s very hard to imagine how Bakken could come into play in a significant way before then. A moderate amount of oil/day from Bakken will likely contribute to maintaining a production plateau for years, which is my long standing prediction of where we’re headed, for exactly the economic and technical reasons mentioned above. A high level of daily production from Bakken would trigger some interesting (to put it mildly) market dynamics. We would possibly see OPEC trim their output to support a market price they like, even as Bakken ramps up and other non-OPEC producers continue to experience production declines.
• Bakken will likely become the object of seemingly infinite discussion in the coming years as cornucopians try to claim it’s “proof peak oil was wrong” (and I’m curious why we haven’t seen them doing this already, frankly), and the Apocalypticons dismissing it entirely (ditto).
• My recommendation for the short run: Chill out. Wait for the truth to unfold. Don’t jump to conclusions. Eat your veggies, exercise, and floss your teeth.