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Bakken Projected Growth Carries Price, Demand Questions
The Bakken has the potential to fill all of the current added demand for sweet crude, but the Eagle Ford Shale and the Permian Basin will have something to say about that, a North Dakota official said.
Unrelenting production growth in North Dakota’s Bakken Shale play carries implications for other competing basins and the prospects for some price volatility for U.S. light sweet crude oil, which North Dakota has in abundance, the state’s top oil/gas official told a meeting of county officials last Thursday.
Lynn Helms, director of the state’s Department of Mineral Resources, listed “potential demand problems” as one of four risk factors that could lower the robust projections for crude oil production increases in the next three or four years as part of his annual report to the North Dakota Association of Producing Counties.
North Dakota by itself could fulfill all of the current North American capacity for moving increased volumes of light sweet crude oil (650,000 b/d), said Helms, adding that this means more intense competition for North Dakota’s supplies from the Eagle Ford and Permian Basin.
“We have the potential to fill that entire amount,” Helms said. He sees the tight capacity being “corrected over time” as refiners decide to move to processing more light sweet crude. “As they get more of a taste for light sweet, we think there will be more of a switch back.”
“There also is going to be some price turbulence from all of this, and we have to take that into consideration,” Helms said.
Helms said if all of the risk factors, including federal hydraulic fracturing (fracking) rules, new oil/gas taxation and stiffer federal rules for the use of diesel in fracking, came into play, North Dakota’s future production might stay at current levels (900,000 b/d) for a number of years. “This is the level we used in building revenue estimates for the state and the counties,” he said. “I don’t thinks that is going to happen, but I do expect one or more of these factors to have an impact.”
In terms of the new development areas, Helms said the Tyler formation is about akin to where the Bakken was in 2004-2005 in terms of its development. Marathon Oil Corp. now has permits for four vertical wells that it plans to drill later in the fourth quarter and into the first quarter.
“This is the beginning of the exploration phase of the Tyler,” Helms said. Based on a successful vertical test in the Tyler, Helms said that test well will be a “good producer, and it gives some encouragement to move forward with horizontal drilling in the Tyler.”
He said the Spearfish formation is further along in its development than the Tyler, being about where the Bakken was in the 2007-2009 time frame. It has the potential for 2,000-3,000 wells being drilled, Helms said.
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