It’s been a dream (or fantasy) of many in the United States to be able to tell the members of OPEC "We don’t need you, so go to Hell." Of course, given our failure to pursue any sort of coherent, practical plan to reduce our dependence on imported oil (for which I blame administrations both Republican and Democratic, the Luddite environmental lobby, and locals who don’t want their view spoiled), this has been nothing more than a dream for over 30 years. Cold fusion seemed more likely.
But, just maybe, this time….
In the next 30 days the USGS (U.S. Geological Survey) will release a new report giving an accurate resource assessment of the Bakken Oil Formation that covers North Dakota and portions of South Dakota and Montana. With new horizontal drilling technology it is believed that from 175 to 500 billion barrels of recoverable oil are held in this 200,000 square mile reserve that was initially discovered in 1951. The USGS did an initial study back in 1999 that estimated 400 billion recoverable barrels were present but with prices bottoming out at $10 a barrel back then the report was dismissed because of the higher cost of horizontal drilling techniques that would be needed, estimated at $20-$40 a barrel.
It was not until 2007, when EOG Resources of Texas started a frenzy when they drilled a single well in Parshal N.D. that is expected to yield 700,000 barrels of oil that real excitement and money started to flow in North Dakota. Marathon Oil is investing $1.5 billion and drilling 300 new wells in what is expected to be one of the greatest booms in Oil discovery since Oil was discovered in Saudi Arabia in 1938.
If true, this is huge, but there’s an old saying about things that seem too good to be true. So, I did a little digging in Georef, the standard Earth sciences database. There’s quite a bit of information on the Bakken formation, which holds the oil in question. This excerpt from the North Dakota Department of Mineral Resources Newsletter caught my eye:
Probable (P2) oil reserves are defined as technically and economically recoverable oil volumes with a probability of recovery greater than fifty percent (50%). Typically P2 reserves require significant capital investment for recompletions, stimulations, drilling,or enhanced oil recovery (EOR) operations such as water-flood improvements, carbon dioxide (CO2) flooding, or other tertiary recovery methods.
The total P2 reserves estimated within North Dakota are over 660 million barrels. These reserve estimates are useful for economic forecasting, infrastructure planning, as well as estimating North Dakota’s possible (P6) reserves.
While 660,000,000 barrels is a fraction of that cited in the first report, bear in mind two things: first, the newsletter item only talks about North Dakota. The Bakken formation extends into South Dakota, Montana, and Saskatchewan, as well. Second, the P2 designation represents a conservative estimate of what is recoverable with then-current technology and then-current oil prices. (A 2006 paper discussing the Bakken reserves in North Dakota is at this PDF link.) With oil breaching $100 per barrel and this new horizontal drilling technology making extraction easier, the recoverable oil may be far greater than the DMR article estimated.
While remaining cautious, there’s no doubt the potential economic and geopolitical implications are enormous. I’ll keep an eye out for that USGS report and revisit this issue after I’ve read it.
And I wish I had shares in Marathon Oil.
UPDATE: There’s more information in this article from the Bismarck Tribune.