A decade ago, North Dakota was a wind-swept also-ran in the oil industry. Wildcatters struck oil there in the 1950s, but the rock was too dense to get most of it out, and the fields never amounted to much. The state produced about 30 million barrels of oil in 2004, enough to satisfy U.S. demand for about a day and a half.
Then everything changed. In the mid-2000s, companies in Texas had figured out how to extract natural gas from dense shale rock near Fort Worth. A few enterprising oil men figured the same approach might work in North Dakota’s oil fields, and after a few false starts, they proved correct. Between 2004 and 2008, North Dakota’s oil production doubled. Then it doubled again. And again. This month, the Energy Information Administration said North Dakota produced 30 million barrels of oil in April — as much as it had in all of 2004.
That kind of growth is nearly unprecedented in the modern oil industry. It’s also unsustainable. If North Dakota continued its recent pattern of exponential growth, the state would be producing more than 400 million barrels of oil per month a decade from now — more than what the entire U.S. produces today. Even at a linear rate of growth, monthly production would top 100 million barrels within the next decade, more than what Texas — a state with 2.5 times the total oil reserves — produces now. Growth has to slow eventually. The question is when.
The issue isn’t whether North Dakota will run out of oil. There’s little doubt that the Bakken Shale, North Dakota’s main oil-producing reservoir, contains billions of barrels of crude. The question is about getting it out. A well’s production rate — how much oil it pumps in a given amount of time — falls quickly, and wells drilled into shale rock like the Bakken decline especially fast, as much as 70 percent in the first year. That means oil production is a treadmill: Companies have to keep drilling just to keep production flat. The more they produce, the more they have to drill to keep up.
The Energy Information Administration, the statistics arm of the U.S. Department of Energy, estimates oil production in the Bakken will keep rising until about 2020, then plateau for a few years before beginning a gradual decline. But North Dakota’s oil boom has consistently defied expectations in recent years, and the EIA acknowledges that its projections are subject to tremendous uncertainty.
In theory, forecasting an oil field’s production requires knowing just three variables: how many wells will be drilled, how much the average well will produce when it first comes online, and how fast that production will decline. But all of those variables are highly uncertain, particularly early in a field’s productive life. Moreover, errors tend to amplify one another: If wells perform worse than expected, they’ll be less profitable and companies won’t drill as many of them.
Whether North Dakota’s oil production meets expectations has major implications for both the state and the country as a whole. For North Dakota, the boom has been nothing short of an economic miracle. The unemployment rate is 2.6 percent, wages and income are rising, and gross domestic product was up nearly 10 percent in 2013. But the state has also become increasingly dependent on the oil industry, which now accounts for more than half of the state’s tax revenue.
The U.S., too, has become increasingly dependent on North Dakota’s oil. The state has accounted for nearly 30 percent of the country’s production growth in the past five years, and the EIA expects it to contribute 45 percent of U.S. growth between 2013 and 2020.
There are signs North Dakota may already be struggling to stay on the drilling treadmill. The number of drilling rigs operating in the state peaked in 2012 and has been trending down. So far, that decline has been offset by two other trends: Drilling is getting faster, meaning each rig can drill more wells, and drilling techniques are improving, meaning the wells themselves are getting better. Taken together, the trends add up to big gains in productivity. In 2007, according to EIA data, a rig working for a month could be expected to add about 116 barrels of oil to the state’s daily production total. In 2013, that number had more than tripled, to 378 barrels a day; over the past three months, per-rig productivity has topped 500 barrels per day.1
There’s a practical limit to how long those gains can continue, however. Drilling efficiency — how many wells a rig can drill in a given period — has been essentially flat over the past year.2 The wells themselves, meanwhile, are getting better at least in part because companies are drilling longer “laterals,” the sections of wells that run horizontally through the shale rock. In 2007, the average well in North Dakota was about 17,000 feet long (including both the vertical and horizontal portions); in 2013, the average well was nearly 20,000 feet long. But that rate of growth, too, is slowing as companies reach the technical and economic limit of how far they can drill.
Eventually, productivity growth won’t just slow but reverse. Companies prioritize drilling in the best parts of an oil field, then gradually shift their drilling to less productive areas. But because the Bakken is so new, no one really knows how those second-tier areas will perform. If they prove successful, Bakken production could enter a long plateau before a gradual decline. If they aren’t, production could decline precipitously. The boom, in other words, is bound to end eventually. Whether it will be followed by a bust remains uncertain.
rockman on Mon, 21st Jul 2014 7:05 am
The article does make a valid point. But IMHO not any more necessary then making the case that the sun will rise tomorrow. Every play in the history of the oil patch has followed the same path: discovery, development and then decline. IOW no boom has ever been “sustainable” and never will be. The Bakken boom will end when the economic viability ends. That will be when the reserves recovered become to small or prices fall. As an example of the later the Haynesville Shale was booming as NG prices rose above $10/mcf and the crashed when it dropped below $5/mcf. There was just as much NG in the play when it crashed as when it boomed. The same could happen in the Bakken. But the play will still begin to fall off even if prices hold.
“In the mid-2000s, companies in Texas had figured out how to extract natural gas from dense shale rock near Fort Worth.” And again the oil patch had the technology to make the Bakken et al boom sooner. What it didn’t have was the high oil price to justify it. Technology hasn’t “saved us”. Paying 300% more for oil has produced more domestic production…for now.
buddavis on Mon, 21st Jul 2014 7:34 am
The East Texas Field was unsustainable as well.
forbin on Mon, 21st Jul 2014 7:44 am
I think the graphs need to be overlaid with the price of oil then we can see what Rockman is saying ….
Forbin
eugene on Mon, 21st Jul 2014 7:51 am
Careful Rockman, you’re using logic, knowledge and reason in the land of fantasy, emotion and unrealistic optimism.
Nony on Mon, 21st Jul 2014 8:22 am
For anyone following the play, the story is kind of trite. Basically, I agree with Rockman. Nothing lasts forever (even if price does not crash).
Would rather read an optimistic (e.g. Goldman, McKenzie Wood) or pessimistic (Rune, etc.) or middle of the road (NDIC, EIA) projection. With some discussion of why they say what they do and some recognition of other people’s estimates, but why they are different.
A story like that gives me something new to chew on. The 538 guys are great at analyzing elections and even kind of cool (for Donks). 😉 But they are not that interesting with respect to oil/gas reporting.
In contrast, would say the recent 45 minute presentation on the Utica by ITG was fascinating. That play is still very early, but the presentation really goes to town in terms of analyzing what data is out there, drawing maps, etc.
westexas on Mon, 21st Jul 2014 8:40 am
In regard to projecting trends, production from the North Slope of Alaska increased from 1.5 mbpd (C+C, EIA) in 1981 to 2.0 mbpd in 1988. At this rate of increase, following is where we would be in 1993 and then 2003 and 2013:
1993: 2.5 mbpd
2003: 3.8
2013: 5.7
Actual production in 2013 was 0.5 mbpd, a -5.5%/year rate of change in production (-5.5%/year was the net rate of change in production, after new wells were added).
While the general consensus in the media these days is that oil wells no longer decline, back in the real world, and away from the Fantasy Island echo chamber, it’s when, not if, that the contribution from new wells can no longer offset the declines from existing wells, i.e., Peaks Happen.
JuanP on Mon, 21st Jul 2014 8:52 am
I tried to beat Rock and be the first to make the price argument in the comments, so I skipped the article after the first paragraph and came straight down here. Fat chance! There is Rock in first place making his argument. Darn!
GE COP on Mon, 21st Jul 2014 9:00 am
What if technology advances in the next 5 years like the last 5 years, do you think that the Bakken will be able to extract more then 6% of the field?
Another reason for the decline in drilling rigs: What use to take 60 days is down to 20 days. The current pipeline capacity is 330K per day and production is 1M, so rail and truck is charging a $15 per barrel vs a pipeline at $5. Drilling cost 3 yrs ago was 11M vs 8 M today.
What is amazing is they are finding gas faster then oil , yet no one is drilling for it other then hitting it when they drill for oil.
rollin on Mon, 21st Jul 2014 9:28 am
Maybe we can figure a way to get energy out of the air instead of drilling down into the earth. Oh yeah, we can. It’s called solar and wind power.
shortonoil on Mon, 21st Jul 2014 9:57 am
Production in the Bakken, and for that matter the entire shale industry has been phenomenal. It shows what almost unlimited cheap money can buy, and we have the FED to thank for that. But there is a wrinkle in the armor of this amazing enterprise. By our calculations it takes an ERoEI of at least 6.9:1 to drive the oil production that powers our civilization. Shale, although the values vary from field to field, generally has an ERoEI of less than 3:1. It is not going to be of much benefit to us after the wheels have ground to a halt.
When I say calculate, I mean calculate. It is not our opinion, back of an envelope projection, or a number pulled out of thin air like where the vast majority petroleum statistics originate. It is a published report that anyone can get at our site, and spend a few days working through its 57 pages of figures and graphs. What you will find is that things are not as rosy as those selling the products would like us to believe. Trust your own judgment, not that of someone else who probably has a vested interest in convincing you otherwise.
http://www.thehillsgroup.org/
GregT on Mon, 21st Jul 2014 10:02 am
As has been commented on here so many times before, solar and wind are both extensions of fossil fuels, but why let reality get in the way of logical thinking?
Of course NDs oil bonanza is unsustainable. We are talking about a finite resource here. Sustainable, and finite are opposites of each other.
Davy on Mon, 21st Jul 2014 10:07 am
Damn straight Short, what we have today is a peak in the number of salesmen. Isn’t that all politicians, lobbyist, financial industry, real estate, MSM, and law profession is? Selling to suckers is big business.
ronpatterson on Mon, 21st Jul 2014 10:34 am
I think the source of this article is important. It is the Democratic leaning web site Five Thirty Eight. 538 being the number of electoral votes required to elect a president.
In about five years Republican web sites will be saying the same thing.
Northwest Resident on Mon, 21st Jul 2014 10:42 am
“It shows what almost unlimited cheap money can buy, and we have the FED to thank for that.”
And near-zero-percent interest rates. Which enable corporations and banks to leverage up on stratospheric debt levels with minimal short term consequences.
Its almost as if back in 2008, TPTB got together and came to the conclusion that our current version of industrial civilization is unsustainable, so they implemented a short-term plan to keep BAU rolling along for just a few more years so they could make final preparations for what is promising to be one hell of a funeral for BAU.
Nony on Mon, 21st Jul 2014 10:43 am
how many sites predicted the boom? I mean it was so obvious and all? How many talked the boom down ALL THE WAY UP? Rune, Piccolo, TOD commenters, etc. etc.
GregT on Mon, 21st Jul 2014 11:00 am
Nony,
We are not in a boom, we are in economic recession, even with the trillions in increased debt. The amount of oil available is irrelevant, if society can’t afford to pay for it. We are not going up Nony, we are going down.
paul candiago on Mon, 21st Jul 2014 11:09 am
Dear Rolling on Moon: that make sense, that is common sense: solar and wind if we can….sorry it will not be accepted to simple. Have fun and keep making holes in the grand and fraking them. Paul
Plantagenet on Mon, 21st Jul 2014 11:12 am
Interesting that they project continued GROWTH in ND oil production all the way to 2020.
GregT on Mon, 21st Jul 2014 11:22 am
It should be even more ‘interesting’, when one considers that 2020 is less than five and a half years away.
shortonoil on Mon, 21st Jul 2014 11:25 am
“We are not going up Nony, we are going down.”
The job security of being a hired gun for BAU is getting worse, and worse!
barry ray on Mon, 21st Jul 2014 11:34 am
Don’t overplay the doom and gloom. Coming to an oilfield near you…..CO2 injection. Which will increase yields another 18 per cent, adding another decade to each field.
mlemley on Mon, 21st Jul 2014 11:40 am
ok experts, how far east of west of the bakken will more reserves be found?
I’m hoping south east:)
Northwest Resident on Mon, 21st Jul 2014 11:57 am
“… how many sites predicted the boom?”
More of a tempest in a teapot, Nony. That “boom” (a propaganda term disconnected from actual physical reality) is a little spike upward in an ocean of downward spikes.
I also strongly suspect that you are a hired advocate for the NG industry, and your job is to sow doubt and discord along with NG propaganda talking points across the internet. That’s the only thing that would explain the general content of your frequent posts.
Kenz300 on Mon, 21st Jul 2014 12:15 pm
Oil, coal and nuclear are the past…………
Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste are the future.
Dredd on Mon, 21st Jul 2014 12:22 pm
North Dakota is a “mini-me” of civilization … except less violent in terms of killing for oil (The Peak Of The Oil Wars – 10).
MSN Fanboy on Mon, 21st Jul 2014 12:25 pm
We should be happy 🙂
One last Boom: One last Hurah: One last Goodbye
You didnt think civilisation wasnt going to put up a fight did you?
The question is… what is after ZIRP and “quantitive easing” ?
And the answer is important lol
Yes= Collapse will be postponed
No= Collapse
The question is, if the patients already hooked up to life support, what else can we do?
MSN Fanboy on Mon, 21st Jul 2014 12:27 pm
Oil, coal and nuclear are the past…………
Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste are the future.
Come off it Nony, meth addiction is a serious issue lol
MSN Fanboy on Mon, 21st Jul 2014 12:28 pm
am i bad………….Kenz 300
rockman on Mon, 21st Jul 2014 12:33 pm
CE – Both hz drilling and frac’ng have been tweaked in the last five years but no big changes as I suspect you envision. Laterals, like 5,000′ to 8,000′, for sure but not because they couldn’t drill longer ones but because they didn’t see the need. We were drilling 30,000’+ laterals 10 years ago.
Same with frac’ng. The last big improvement came over 15 years ago with slick water frac’s. An improvement but even it wasn’t a game changer making the uneconomic suddenly economic. If you’re waiting on a major tech improvement I think you’ll have a long wait.
Amvet on Mon, 21st Jul 2014 1:33 pm
To see how the production declines in the shale areas compares to the new production,
look at the monthly EIA drilling productivity report on line.
Howard on Mon, 21st Jul 2014 1:45 pm
It is the American free market at work. Notice all the new reserves are on private lands where government has little impact in driving out the profit motive. The question isn’t when this field will run dry. The question should be why aren’t public lands following in their foot steps to help increase our reserves and world production driving down prices. Thus buying us time to bring alternate energy sources online in a cheap and efficient manner.
John Frey on Mon, 21st Jul 2014 1:50 pm
Interesting locker room banter from some people who are obviously in the business. The bigger picture is what “boom” or “bust” mean. The average person is not greatly affected by the swings and cycles of the industry. No one has bought me a new car or paid my mortgage since North Dakota was fracked, and I don’t think I’ll lose sleep or money when it’s over.
marmico on Mon, 21st Jul 2014 2:01 pm
I>We were drilling 30,000′+ laterals 10 years ago.
Produce the historic well details.
bill hash on Mon, 21st Jul 2014 2:14 pm
check out the following although the website is for another novel you can check abiotic the end of oil through the website. Of course the novel is only 2.99 free if you have amazon prime
http://www.amazon.com/ABIOTIC-End-Oil-Bill-Hash-ebook/dp/B00JK1DM3W/ref=sr_1_1?ie=UTF8&qid=1405969932&sr=8-1&keywords=abiotic+the+end+of+oil
M1 on Mon, 21st Jul 2014 2:34 pm
Hey, That’s a HOCKEY STICK Graph!
What are you LIBTARDS, everyone knows there’s no such thing as a hockey stick graph.
Nony on Mon, 21st Jul 2014 3:08 pm
I’d love an explanation of the Marcellus. If the technology was all known and the geology was known and just waiting for price, how do you explain the Marcellus? Explain it increasing supply AND doing so during a cheap price regime?
marmico on Mon, 21st Jul 2014 3:38 pm
The explanation is that rockman drilled a 5 mile lateral in 2004. Bullshit.
copious.abundance [co] has the Export Land Model in the crosshairs. I think the ELM is gibberish, but co is more skilled with data than nony!
Once again, where in the data sheets are rockman’s 2004 lateral wells? If he doesn’t produce, he should stand down.
John Bruce on Mon, 21st Jul 2014 4:19 pm
ND also has abundant wind resources. It is far less disruptive, and dirt, and will never decline. There is enough usable wind energy there to supply the whole USA at today’s level of use and cattle and crops can be all around and under the towers with no problem.
Mike on Mon, 21st Jul 2014 4:26 pm
Marmico, you have the manners of a goat.
Google extended reach drilling. By the way, that stuff leaking out from under your car, on the driveway, that’s as close as you will ever get to understanding the complexities of finding and producing oil, son.
Northwest Resident on Mon, 21st Jul 2014 4:40 pm
Hey marmico — Read this:
“Maersk Oil Qatar AS (MOQ) completed drilling the world-record BD-04A well in May 2008 offshore Qatar. It was the successful outcome of engineering efforts to increase extended-reach capabilities.
MOQ started to develop the Al-Shaheen Field offshore Qatar in 1994 with horizontal drilling techniques pioneered by Maersk Oil & Gas AS in the North Sea.
In May 2008 the BD-04A well was completed with a record horizontal length of 35,770 ft. This well also set world records for the longest well at 40,320 ft MDRT and the longest along-hole departure of 37,956 ft.”
drillingcontractor dot org/continuous-improvements-lead-to-maersk-oil-qatars-longest-horizontal-well-in-the-world-1924
And that was in 2009, about five years ago. I’m sure I could find where they were drilling 30,000 ft+ laterals ten years ago like rockman says, but why do your homework for you.
“
marmico on Mon, 21st Jul 2014 4:45 pm
Mike, thank you very much for pointing out that rockman (5 mile lateral in 2004, actually 5.68 miles) is a goat.
I’ve met a few goats licking winter salt on the roads in the Rockies. Is the rockman any different?
Once again, where in the data sheets are rockman’s 2004 lateral wells? If he doesn’t produce, he should stand down.
Northwest Resident on Mon, 21st Jul 2014 4:48 pm
“I’ve met a few goats licking winter salt on the roads in the Rockies.”
PapaSmurf — Is that you? Exceptionally rude. Exceptionally crude. Exceptionally wrong. Maybe it is a PapaSmurf clone???
marmico on Mon, 21st Jul 2014 5:05 pm
Can I call you NWR?
rockman was drilling 5.68 mile laterals in Texas, Lousiana, GOM in 2004, not Qatar in 2008.
Once again, where in the data sheets are rockman’s 2004 lateral wells? If he doesn’t produce, he should stand down.
Bullshit is bullshit. rockman should just apologize for his hubris and move on.
Stanley P on Mon, 21st Jul 2014 6:15 pm
They’ve been saying oil has peaked since they 60’s. Gloom and doom. Now all of a sudden its going to last for ever and over heat the planet.
GregT on Mon, 21st Jul 2014 6:17 pm
“Maersk Oil Qatar AS has drilled the longest horizontal section at more than an 86? inclination. The EA-04 well, drilled April 29, 2004, reached 30,940 ft (9,437 m) at a total vertical depth of 3,510 ft (1,070 m) in 213 ft (65 m) of water. “
GregT on Mon, 21st Jul 2014 6:27 pm
Ready to stand down yet Goat er marmico/Nony/Papasmurf?
Joe on Mon, 21st Jul 2014 7:30 pm
What workover plans have been introduced? Any swabbing or other artificial lift planned to decrease the depletion percentage?
Joe on Mon, 21st Jul 2014 7:36 pm
Any CO2 well injection planned? That helps the oil atomize in a sense that it creates an overbalanced well with gas, not drilling mud.
Heck, why not take trapped CO2 from coal fired power plants and inject all that into an underbalanced, non-producing well and negate any so-called carbon tax credits? It could work….
Dual Fuel on Mon, 21st Jul 2014 10:10 pm
Mr Bud Davis, are you talking the same East Texas oil field that Mr Hunt, Mr Getty and now people like Mr. Aubrey McClendon and others have drilled big wells in? Let’s see that spans about 100 years just on a rough estimate. Now that said the boom and bust cycle are as real as taxes and death. And there have been new discoveries in and new techniques that kept it alive. The old saying in the business is, ‘The best place to discover a new oil & gas field is in an old oil & gas field’ or something close to that. Interesting article though.
gypsy patrick on Mon, 21st Jul 2014 10:24 pm
It seem to require a whole lot of fresh water which instead of pulling fresh ground water use the water from a sewage plant. They have ben saying for years that it’s good enough to drink. Can’t buy up farm land to extract sand underneath the top soil Yes you may have jobs for the short term what happens when the sands all gone with the topsoil God wants us to be good stewards of his creation don’t give lip service cause abortion do it all or do nothing there is no grey