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Five-Year Outlook: North Dakota Oil Production to Grow Steadily

On average, North Dakota oil production, which surged past the 1 million b/d mark earlier this year, will continue to grow steadily at a rate of about 18,000 b/d each month through 2019, according to a study completed in September for the state legislature.

Commissioned last year by state lawmakers (see Shale Daily, Oct. 14, 2013), Bismarck-based engineering/planning firm Kadrmas, Lee & Jackson (KLJ) completed the work in partnership with North Dakota State University, concluding that daily production could hit the 2 million b/d level during the period.

KLJ and the university used three approaches to forecast the sustainability of oil and gas production: economic analysis of the Bakken/Three Forks shale formation; projections on population, employment and housing needs; and potential for enhanced oil recovery (EOR).

The study showed that even at $70/bbl oil prices, economic payback times can be kept relatively short (four years and under) when initial production (IP) rates stay above 1,000 b/d. IP rates of about 2,000 b/d produce paybacks in a matter of months, even at the lower oil prices.

KLJ CEO Niles Hushka characterized some of the takeaways from the study for Bakken Magazine as including the fact that it is a misconception that Bakken producers are making a lot of money really fast. Hushka said that because the industry requires high capital investment (an average of $7.5 million/well in spud-to-completion costs), "the oil production business is not as profitable as people think." Data from the best oil-producing parts of North Dakota demonstrate that, Hushka said.

"Although some wells in the core of the Williston Basin offer a payback of roughly six months to two years, wells outside of the core take much longer to pay off," he told the magazine.

The KLJ study showed some models in which wells in some areas were profitable at $35/bbl. If oil prices turnaround again and head upward, Hushka predicts other areas outside of core producing areas will start to pick up.

Under current regulations and policies, roughly 20% of the Williston Basin is restricted from development, and one third of the state's oil production continues to come from federal lands at the Fort Berthold Reservation, according to the report.

EOR using carbon dioxide (CO2) injections to get extra production out of mature wells has the potential to increase overall production in North Dakota, the study pointed out. "In conjunction with other non-traditional technologies, such as horizontal drilling and hydraulic fracturing, CO2 EOR should be recognized as part of a long-term production strategy for North Dakota oilfields. Modeling and analysis proves there is significant opportunity."

The primary challenges to EOR during the next five years, the study said, are the need to acquire sufficient volumes of CO2 and the oil/gas companies willingness to invest in EOR.

Today, the top 10 ranked conventional U.S. oilfields have a combined estimated recovery from EOR of 87.2-186.2 million bbl, requiring up to 83.6 metric tons of CO2, according to the study.

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