Thread: U.S. Oil Industry Booms -- in North Dakota

FEBRUARY 26, 2010.

Oil Industry Booms -- in North Dakota

State Is Riding High as Firms Develop Better Ways to Tap Huge Bakken

Shale Deposit, Raising Hopes for U.S. Production.

KILLDEER, N.D.—A massive oil reserve buried two miles underground has put North Dakota at the center of a revolution in the U.S. oil industry, a shift that has radically altered the fortunes of this remote area.

The Bakken Shale deposit has been known and even tapped on occasion for decades. But technological improvements in the past two years have taken what was once a small, marginally profitable field and turned it into one of the fastest-growing oil-producing areas in the U.S.

The Bakken Shale had helped North Dakota oil production double in the past three years, surging to 80 million barrels in 2009—tiny relative to the more than seven billion barrels consumed by the U.S. every year, but enough to vault the state past Oklahoma and Louisiana to become the country's fourth-biggest oil producer, after Texas, Alaska and California. If current projections hold, North Dakota's oil production could pass Alaska's by the end of the decade.

"Most people felt like they could kind of write off the oil industry in the U.S., and that's just a long way from the truth," said Harold Hamm, chairman and chief executive of Continental Resources Inc., one of the biggest Bakken producers. "The fact of the matter is that a lot of people quit looking for oil." Continental reported Thursday that its North Dakota oil production doubled in 2009 and would continue to grow rapidly this year.

The Bakken Shale could contain up to 4.3 billion barrels of recoverable oil, according to the U.S. Geological Survey. That would make it the biggest oil field discovered in the contiguous U.S. in more than 40 years—and many in the industry believe the amount of recoverable oil could be even greater as new technology allows companies to tap more of it.

U.S. oil production has fallen by nearly 50% since its peak in the 1970s. Even with the Bakken Shale, U.S. oil production isn't expected to ever return to 1970s levels, and even the most optimistic projections of production from the North Dakota field don't account for more than a small fraction of total U.S. oil demand. But new production from the Bakken Shale, combined with other big oil discoveries in California and the Gulf of Mexico, helped U.S. oil production rise last year for the first time since 1991, according to U.S. government figures.

News Hub: North Dakota's Oil Boom
2:12
WSJ's Ben Casselman joins the News Hub to discuss North Dakota's oil boom. Known as the Bakken Shale, the field could contain up to 4.3 billion barrels of recoverable oil. That would make it the biggest oil-field discovery in the U.S. in more than 40 years.
.Production has grown so rapidly here, 100 miles south of the Canadian border, that companies had to build a rail line to transport their oil to market, since there wasn't a big enough pipeline in the state to handle the oil. Companies have scrambled to find labor in a state with fewer than a million people, and to keep drilling rigs running when the wind chill pushes temperatures to 50 degrees below zero. Booming Bakken oil production has helped North Dakota escape the worst of the economic downturn. The state's unemployment rate was 4.3% in December—more than five percentage points below the national level—and the state government projects a surplus for the current budget cycle.

The impact has been especially notable in the oil-producing western part of the state, making millionaires of local ranchers who sell access to oil beneath their properties. Oil-field workers have flooded the western city of Williston, leaving it with a chronic shortage of hotel rooms and making housing scarce. In Dickinson, three hours to the south, a labor shortage has the local McDonald's offering $300 signing bonuses. And here in nearby Killdeer, a town of 700 people that lies in the heart of oil country, oil workers jockey with locals for lunchtime tables at the Buckskin Bar & Grill, which serves burgers made from locally raised buffalo.

"Who expected oil? It's just, 'oh, gee whiz, oil!'" said Pam Reckard, 66 years old, as she waited for lunch at the Buckskin on a recent Thursday.

Ms. Reckard and her husband, Ben, said many locals, having seen past booms and busts, are taking a cautious approach to the region's newfound oil wealth. The Reckards are still driving their 1990 Dodge pickup despite having two successful oil wells drilled on their 1,120-acre ranch, which Mr. Reckard's family has owned since 1915. But they have noticed the changes. "There are a lot of people that were not from North Dakota," Ms. Reckard said.

.The industry hopes the Bakken's significance could extend far beyond North Dakota. The Bakken formation stretches into Montana and across the U.S. border into Saskatchewan. Other oil-bearing shale formations exist in Colorado, Texas, California and other states.

"It's a true game-changer," said Jim Volker, chairman and CEO of Whiting Petroleum Corp. a Bakken oil producer. "We still think there's a significant amount of oil reserves in the United States left to be discovered."

The field also could have global implications. Besides small producers such as Continental and Whiting, the Bakken has drawn companies like Marathon Oil Corp. that hope to use what they learn in North Dakota to produce oil and gas overseas. "It's been a great laboratory for us," said Dave Roberts, who heads exploration and production for Marathon.

Oil companies have known about the formation, and the oil trapped in it, since at least the 1950s. But they couldn't get more than a trickle of oil from the dense, nonporous rock.

That began to change in the early 2000s, when companies in Texas began using new drilling techniques in a similar formation near Fort Worth known as the Barnett Shale. They would drill down thousands of feet and then turn and go horizontally through the gas-bearing rock—allowing a single well to reach more gas. Then they would blast huge volumes of water down the well to crack open the rocks and free the gas trapped inside.

.Several companies, including Houston-based EOG Resources Inc., thought the same techniques could work on oil formations. But oil molecules are larger than gas molecules, and they didn't flow as easily through the cracks. EOG's first several wells in North Dakota were failures.

"The first three or four wells, it was not clear that there would be a viable economic solution," EOG Chairman and CEO Mark Papa said. "But we just felt like, well, it's worth investing $20 to $40 million in this because if it works there's a huge upside."

By 2006, EOG was making money on wells drilled in a small corner of the Bakken that was particularly well-suited to oil production.

The real shift has come in the past two years as companies honed drilling techniques, leading to bigger wells, faster drilling and lower costs. Marathon, for example, last year took an average of 24 days to drill a well, down from 56 days in 2006.

That has opened up new areas that weren't previously worth drilling in and made wells profitable at prices as low as $50 a barrel, down from $80 three years ago, according to analyst Mike Jacobs of investment firm Tudor Pickering Holt & Co.

Write to Ben Casselman at ben.casselman@wsj.com

http://online.wsj.com/article/SB1000142 ... _US_News_3

Just went and looked and this basin has some of the finest oil around, light crude which is easily refined, and fetches the highest prices versus the medium and heavy oils.

I have high hopes this will work out well for my brothers and sisters in ND! I also believe they will fight tooth and nail to make sure any and all jobs remain in the hands of AMERICANS.
QUOTE:

"This is an opportunity for us to help ourselves as much as we get help," Levings said. About 4,500 of the approximately 12,000 tribal members live on the reservation, one of about 300 in the United States.


American Indian reservation reaping oil benefits

By JAMES MacPHERSON
The Associated Press
Wednesday, February 24, 2010; 5:45 PM

NEW TOWN, N.D. -- An oil boom on American Indian land has brought jobs, millions of dollars and hope to long-impoverished tribal members who have struggled for more than a century on the million-acre Fort Berthold Indian Reservation.

In little more than a year, oil companies have put dozens of money-producing rigs on remote rolling prairie and sprawling badlands that are home to small cattle ranches and scattered settlements of modular housing. Although other tribes around the nation have oil interests, industry officials said none has likely experienced a recent windfall of this scale.

The reservation is occupied by the Mandan, Hidatsa and Arikara tribes, known as the Three Affiliated Tribes, who were placed in west-central North Dakota by the federal government in the 1800s - long before anyone knew of the oil.

"If they knew there was billions of barrels of oil here, they would never have put us here," said Spencer Wilkinson Jr., general manager of the Four Bears Casino on the reservation.

"There is probably more opportunity here than people have had in their lifetimes," said Marcus Levings, chairman of the Three Affiliated Tribes. Roads are now sometimes clogged with traffic, including Hummers and expensive pickup trucks. The local casino is buzzing with free-spending locals. And tribal members who had moved away to find work are now moving back for the abundant good-paying jobs.

Tribal officials say the oil has helped right a wrong done to the tribes in the 1950s, when more than a tenth of the reservation was flooded by the federal government to create Lake Sakakawea, a 180-mile-long reservoir.

Oil companies are now drilling beneath the big lake, using an advanced horizontal drill technique. Recently completed regulatory paperwork removed the last obstacle.

Since the boom began, lease payments of more than $179 million have been paid to the tribe and its members on about half of the reservation land, tribal record show. Millions of dollars more in royalties and tax revenue are also rolling in.

Levings said the tribe will use its money to pay off debt, and bankroll such things as roads, health care and law enforcement.

The reservation contains portions of six counties, covering more than 1,500 square miles. It lies atop a portion the oil-rich Bakken shale formation, which the U.S. Geological Survey estimates holds 4.3 billion barrels of oil that can be recovered using current technology. The agency said the Bakken was the largest oil deposit it has ever assessed.

In addition to the oil money, the tribes get $60 million to $70 million in federal aid annually from the federal government.

"This is an opportunity for us to help ourselves as much as we get help," Levings said. About 4,500 of the approximately 12,000 tribal members live on the reservation, one of about 300 in the United States.

State demographer Richard Rathge said 28 percent of people on the reservation were living in poverty in 2000, the latest figures available. More than 40 percent did not have a job at that time.

The opening of the casino in the 1990s added about 200 jobs. But oil's impact has been huge. "Anybody who wants to work can work," said Levings, with jobs available on rigs and in support industries such as oil supplies and trucking.

The reservation was the last area to be targeted by companies in the state's oil patch because of onerous federal requirements. But a 2008 tax agreement standardized the rules for oil drilling.

Dozens of wells have been drilled and more than 500 could be operating within five years.

Lovina Fox hopes at least one winds up on her land near Mandaree, a town of about 500 on the reservation. Lights from nearby drill rigs and flares burning off excess gas already illuminate her home.

"Everybody knows everybody here," she said. "If people are getting rich they're not saying anything and keeping it hush-hush. But it's not hard to figure out who's getting money - it's the people who have haven't worked in years and all the sudden, they're driving new vehicles."

Tribal member Rose Marie Mandan, who admits to earning "a nice little cushion" from oil payments, said she moved away from the reservation more than 50 years ago to find a job, then returned after retiring. "In the 1950s there were no jobs here," said Mandan, 80. Now she's seeing tribal members moving to the reservation for work.

Chuck Hale worked as a roughneck in other states before returning to his home near New Town to take a good-paying oilfield job. "It's tough work and it's damn cold," Hale said. "But it's worth it."

Mandan worries about the effects of the instant wealth. "It can be good but only if people know how to use the money," she said.

Wilkinson Jr., the casino general manager, said casino revenue jumped from $4.5 million in 2008 to $7.2 million in 2009.

He said he had advised tribal elders "to have fun at the casino but don't spend it all there. I've told them to invest it in something useful, like ... their house and kids and grandkids, and send them to college."

(This version corrects the spelling of Levings instead of Levins in paragraph 14.)
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