Bakken Boom

A recent trip to my birth state of North Dakota provided a perspective on this enormous oil boom. Initially a drilling site is selected and a “pad” is leveled.   Often at least four wells are located on one pad.  The exploration companies are drilling to a depth of 2 miles and then extending out horizontal in multi directions 2-3 miles into the Bakken shale formation. Using  Hydraulic Fracturing (fracking) technology (water, chemicals, sand, and very high pressure), the shale is broken along the horizontal bore holes to allow oil (and  natural gas) that is otherwise trapped to flow into the main vertical casing and up to the well head.  The hit rate is nearly 100% vs. a much lower rate for “pool” oil fields.  The completion of each well requires 2000 tractor-trailer trips leaving the roads and other infrastructure very stressed and requiring constant maintenance…Tragically , due to the severity of the winter weather, limited infrastructure (especially including pipelines), and geography the accident rate is now over  double that of mature US oil fields.

Currently there are about 11,000 operating wells in North Dakota that are now producing 1M bbl./day , but extracting just 6% of the very light sweet crude in the shale.  The crude oil is trucked to a rail head and then one mile long BNSF trains deliver to refineries.  There have been several train accidents including a huge non-fatal derailment and fire near Casselton, ND. If the price of crude oil remains at $90-100/bbl., there are estimates of 50,000 wells in a dozen years…!

In addition to the infrastructure stress and higher accident rate, the lack of pipelines is costing about $10/bbl. and requiring the flaring of almost $200M/ year of natural gas (note the night satellite picture of the Bakken)..!

While new domestic energy sources will help fuel the US economy, additional supply will mitigate the decades of Russian, Mideast, and OPEC influence on US foreign policy.