FARGO - Continental Resources estimates that the Bakken Formation has reserves of 30 billion to 40 billion barrels of recoverable oil, or roughly four to five times more than the government’s latest estimate.
The estimate of the Bakken’s potential was disclosed during the North Dakota Petroleum Council’s Bakken 2.0 conference on Monday, Sept. 24, by Jack Stark, president of Continental Resources, a top oil producer in the state.
“It’s a big number but I think it’s a technically sound and a technically well-founded number,” Stark said. “There’s a lot of future left in the Bakken.”
The latest estimate by the U.S. Department of Energy of the Bakken’s reserves is 7.6 billion barrels of recoverable oil, he said. Continental Resources, the pioneer in developing the Bakken, has consistently had higher estimates than the government of the formation’s potential.
North Dakota recently surpassed Venezuela in oil production, and the United States recently became the world’s largest oil producer, outranking Saudi Arabia and Russia.
North Dakota has 15,000 oil wells, and state officials estimate it has the potential for another 50,000 wells in the decades ahead.
“As North Dakotans, we just won the geology lottery,” said Gov. Doug Burgum, who spoke after Stark’s presentation. At last year’s conference, Burgum challenged the industry to reach production of 2 million barrels of oil per day, double the 1 million barrels per day level at the time.
Bakken production has increased steadily as technology advances, and the 2-million-barrel-per-day benchmark no longer seems out of reach, industry representatives said Monday.
“This is a huge research project and has been since we drilled the first well,” Ron Ness, president of the petroleum council, said in a meeting Monday with The Forum Editorial Board before the conference.
Earlier this year, production in the Bakken Formation reached a new peak of 1.273 million barrels per day, Ness said.
In 2010, at the annual conference, one industry official predicted the day North Dakota would reach 1 million barrels per day in production. “He got scoffed at by industry people,” Ness said. But the milestone was reached in April 2014.
Kathy Neset, a geologist who consults in the Oil Patch, said oil production has increased three- to five-fold in recent years, exponential growth driven by both better drilling and hydraulic fracturing -- or “fracking” -- technologies.
“Can it happen in the next three years?” she said, referring to the 2 million barrels per day threshold. “Maybe. I wouldn’t have said that last fall.”
When fracking first came to the Bakken, oil companies were capturing 3 percent to 5 percent of the oil, which is locked in shale rock formations deep underground. Now that recovery rate typically ranges from 8 percent to 12 percent, and reaches 14 percent to 16 percent in some places, Neset said.
Oil companies including Continental Resources, the pioneering company to frack the Bakken, now have their sights set on recovering 20 percent or more of the oil in the Bakken, a process that will evolve in the years ahead as technology continues to advance, Stark said.
Under one scenario, assuming 70 drilling rigs are active, Continental Resources predicts North Dakota could reach 1.8 million barrels in the next five years, he told the conference audience. Also, he said, U.S. oil production could increase by 50 percent over the next five years.
The cost of drilling a Bakken well is now $8.5 million, down from around $10 million before 2011, Stark said. It used to take 33 days to drill a well, a process that now takes only 11 days, enabled by efficiency gains.
The downturn in the oil industry forced operators to sharpen their operations, and drove technological and efficiency gains.
“We’re getting more done with less,��� Jeff Hume, Continental’s vice chairman of strategic growth initiatives, told The Forum Editorial Board. As a result, oil companies now need to hire workers with technical training and commensurate pay levels.
“That long-term employment base is getting bigger and bigger,” Hume said, referring to the permanent workforce needed to operate and maintain wells, pipelines and gas processing stations. “It’s a boon for the native North Dakotans.”
Each well has a lifespan of 50 years, Hume said. “So there are long-term jobs.”
Because of increased U.S. oil production in shale plays, including the Bakken, oil prices today are much more stable than they once were, said Blu Hulsey, a senior vice president at Continental and vice chairman of the North Dakota Petroleum Council.
“This has all changed and North Dakota has been part of that,” he said. “We have a geopolitical arm that’s this state. It really is amazing.”