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The Top Oil and Gas Trends in the Bakken

Bakken_small (2)

The Bakken shale formation has long been recognized as a major source of oil; covering about 200,000 square miles of the subsurface of the Williston Basin, underlying parts of Montana, Saskatchewan and North Dakota.
 
Due to technical limitations in the past several years, it has only been until fairly recently (2008) that significant amount of oil has been recovered in the area. The flurry of activity in the Bakken, combined with the use of current technology, has significantly increased oil production rates that outstripped the capacity to ship oil out of the Bakken.
 
Here, we have come up with a short list of trends in the Bakken oil production, as described by some of the well-known names in the oil and gas industry. These are professionals from all sorts of backgrounds in the industry, discussing recent developments like how the latest innovations in the oil recovery process can contribute to cut fuel costs. They have seen new companies come in to take full advantage of the natural gas produced as a by-product of the Bakken crude production process.
 
Another issue that is currently affecting oil production in the Bakken is the state legislation in North Dakota, where most Bakken activity is taking place. Professionals speculate that oil and gas companies will continue to grow in the Bakken as long as state legislature is receptive towards companies when it comes to effecting policies towards the development of the Bakken and to promote its sustainability. Charles DeMakis of the DeMakis Law, PLLC observes that mineral owners in the Bakken should properly handle and protect their holdings for the future generations, instead of seeing this explosion of activity and the riches that are coming from it as a fad.
 
Marsten Bednarz reveals that long-term agreements between rail and crude suppliers, pipeline development, and local refinery developments contribute to the overall production rate and price of the Bakken crude oil. These are just some of the emerging trends that are currently shaping the oil and gas industry in the Bakken. How it will affect the market will be thoroughly discussed here. Feel free to leave a comment or add a few more of your own to the discussion (photo courtesy of roy.luck)
 
Christopher Christopher Heroux, Partner at Heroux Partners PLLC
“One of the top trends in the Williston/Bakken right now is the implementation of infrastructure improvements addressing long-standing limitations on crude processing and transportation capacity in the field. On the processing front, there are three new refineries in the construction or planning phase. These will be the first new U.S. refineries in almost forty years. The transportation bottleneck caused by limited truck and rail options is being addressed by a number of new crude and refined product pipelines. These developments will have a long term positive effect on production.”

trent Trent Lee, CEO Group Chair, Executive Coach at Vistage International
“There’s a huge focus today by operators in the Bakken to improve operational efficiency and drive costs out of the supply chain. Costs per well have risen from $6 million just 5 years ago to over $10 million commonly today. There has been a shift by most operators toward multi-pad driving arrangements, dubbed an “eco-pad”, where multiple wells are drilled on a signal work site. Typical eco-pads would house 4 to 8 wells on a site, but recently, I’ve heard of operators working on eco-pads with 24 plus wells on a single site location. Consolidated resources; labor, transportation and infrastructure into a signal footprint is a major step for producers to drive out duplicated costs.”

Benjamin-2 (2) Benjamin Kruell, Operations Advisor for Minn-Dakota Coaches, Inc. | Ottertail Trucking, Inc.
“The most critical trend I see in the Bakken is efficiently and safely moving the crude oil out of the region to refineries. Petroleum is the biggest source of our nation’s energy, accounting for 65% according to the U.S. Energy Information Administration and the Bakken could be producing more than 1.5 million barrels by year end as some experts predict.

The largest oil rail-car shipper in the Bakken is Warren Buffet’s Burlington Northern
Santa Fe, LLC who plans to increase its crude shipments by 40% to 700,000 barrels per
day by the end of 2013 (Bloomberg, 2013).

Not to be out done, Enbridge plans to add a new pipeline named “Sandpiper” that will
move 225,000 barrels per day in addition to their current ND system that moves 210,000
barrels out of the Bakken each day.

Pipelines remain the most popular transportation option and can move far more oil than
trains in terms of efficiency and safety. A modest pipeline can move the equivalent of
a train consisting of seventy-five 2,000-barrel tank rail cars each day (PHMSA, 2007).
Pipelines also take trucks off of the already dilapidated roads in the Bakken which
reduces the number of possible accidents. In 2012, 169 people were killed on ND roads.

From a logistics and safety standpoint, it makes more sense to move the crude from
the wellhead to the refinery by pipeline, but trains can take the crude to markets that
pipelines don’t exist in and therefore yield a higher return for producers. Ultimately, it
comes down to dollars and sense with both modes of transport working together to move
the crude of the Bakken efficiently and safely.”

Pat (2) Pat Murray, Director-Northern Rockies Resources, Epic Energy Services
“I know the biggest challenge is getting good, qualified people to come to the Bakken. I tell people it is great work, with good solid companies. This is one of the few places in the country where things are going, take advantage of it.”

Charles (2) Charles DeMakis, DeMakis Law, PLLC
“The main trends I am seeing in regards to the Bakken are in regards to mineral owners and planning for the future with their holdings. Too many mineral owners see this explosion of activity and the riches that are coming from it as a fad and are not taking effective measures to protect their producing minerals for generations to come. The production from the Bakken and its continued development is going to continue to produce multiple well pads and continue to produce tremendous profits for mineral owners. To properly handle these new found riches or benefits owners need to be aware of planning tools and techniques to protect those assest and properly transfer them down to their future generations.”

Marsten (2) Marsten Bednarz, Bakken Area Marketing, “The Bakken Field Guide”
BAKKEN OIL & GAS TRENDS

“Logistics/ Crude Shipment
• Pipelines
• Rail Facilities
o Now expanding to barge shipments
• Local Refineries

Long term contracts between rail and crude suppliers, pipeline development, and local refinery developments contribute to the overall rate of production and price of the crude. Previously, Bakken crude was traded at discount prices due to the transportation bottlenecks, oil was being produced faster than it could be shipped. Now that we’re moving forward with logistics, the gap in the ratio of production to shipping capability has closed and companies have several transport options. They can transport their crude East, West, South, and with access to the Gulf via the Mississippi through a rail plus barge method.

Cost Cutting
• EcoPad & Walking Rigs
• Horizontal Drilling & Hydraulic Fracturing Techniques

We’re seeing lower rig counts with a higher amount of production due to the efficiency of new rig design. Instead of tearing an entire rig down and moving from one location to another, companies continue to move towards ‘walking rigs’ on an ‘eco-pad’. They’ll (oil companies) will drill up to 14 wells in different horizontal directions from the same pad, ultimately saving the time and labor it takes to disassemble, transport, and reassemble a rig at a different location.

Proppant used to hold fractures open after the fracturing process has become more cost effective. Other innovations in the fracturing process are also contributing to cost cuts. I won’t mention any company names, but one company for instance went from cutting costs by $6000 a well in 2011 to as much as $400,000 a well at the end of 2012 simply by developing a method to recycle the water from their process.

Natural Gas Usage
Reports indicate around 29% of natural gas produced as a byproduct of the Bakken crude production process is flared off. New companies are coming in to not only construct infrastructure for capturing the flared off gas, but also to use the source to fuel drilling and transport operations by converting existing combustion engines to run on compressed and liquid natural gas (fuel cost savings?). CNG and LNG fueling stations are also coming to the region to take advantage of the ‘wasted’ gas.

State Legislation
North Dakota (where most Bakken activity is occurring) legislation is at the forefront of American oil & gas production regarding policies. Whether people agree or disagree with the booming Bakken industry, North Dakota’s economy is number one in America for a reason. Oil & Gas companies will continue to grow in the Bakken as state legislature continues to work directly with companies on implementing successful policies to fully develop the Bakken and promote sustainability.”

Bill (2) Bill Biewenga, COO, Qv21 Technologies, LLC
“Changes In the O & G Industry”

A wide variety of data permeates the O&G Industry, and it is becoming larger in scope and volume. It is also becoming increasingly accurate and timely. These factors radically change the way data is used to enhance profitability in a number of ways.

• BIG DATA is evolving into INTELLIGENCE – usable, actionable information
• FIXED information is becoming MOBILE and available to more users
• BATCHED data is becoming REAL-TIME
• OWNED computer storage and assets are becoming LEASED Software as a Service (SaaS)
• INTERNALLY OPERATED, stored, retrieved, protected is drawing upon MANAGED EXPERTISE (The Cloud)
• EXPENSIVE dedicated resources are becoming HIGHLY AFFORDABLE
• COMPLEX software is becoming more EASY-TO-USE
• BIG, COSTLY UPGRADE CYCLES are giving way to CONTINUOUS RELEASES/UPGRADES.

The results are that costs go down. Profitability rises, and the ROI for data management and utilization accelerates.

Real-time, comprehensive and accurate digital data not only reduces labor costs in the short term, it also enables integration with other software solutions. Accounting software is enhanced. Predictive analytics are enabled so problems are avoided rather than merely recorded. Creative visualization enhances the ability of managers to quickly identify problem areas identified in the mountains of data. It all starts with timely, accurate and comprehensive data collected efficiently in the oil fields. These changes are currently underway in the O&G Industry, and the impact is significantly changing the way business is conducted and profits are realized.

Dominic (2) Dominic Pallone, Senior Landman with a Bakken E&P
“We are entering an exciting time in the Bakken. Operators are taking existing producing 1280 acre spacing units and putting them together to form 2560 acre spacing units. This enables them to drill the lines between sections and recover even more hydrocarbons. The configurations of these 2560′s are multiple. The 2560′s could be made up of portions of two, three and even four existing 1280 acre spacing units. It is very exciting to see the creativity being applied in forming these new drilling spacing units in order to develop as much of a field as possible. It’s only a matter of time before adjacent operators work together to re-space and form drilling units from each other’s existing drilling spacing units to increase production for both and drill otherwise undrillable wells (due to current section line setbacks in 1280 acre drilling units).”

David Frenkel, Manufacturers Rep
“The Bakken oil patch is bringing more national attention to ND by various national media outlets. Stories about the growth of oil production to the 2nd largest in the US as well as related job growth have made national headlines. ND has the strongest economy of any state with the combination of oil and agriculture they have made the ND economy the envy of every state. ND is proving the oil economy is not a boom and bust cycle and ND will produce significant amounts of oil for some time to come and will bring more national stories of the ND economic miracle.”
 

TNphoto Tatsuya Nakagawa
Tatsuya Nakagawa is the VP of Marketing and co-founder of Castagra Products, a storage tank and wastewater coatings manufacturing company that is highly acclaimed for its sustainable coatings, cold weather tank coating applications, and its durable frac tank coatings. Castagra is used by the world’s top oil and gas field services companies.