700,000 barrels of oil a day out of North Dakota is no big deal. It’s all hype. – Peak Oil #14

Bruce Oskol, writing at Million Dollar Way, gives some background why he started that blog:

Again, one of several reasons for starting the blog a couple years ago was to counter the naysayers.

The original naysayers doubted the Bakken even existed — hard to believe, I know; and then, when the numbers started coming out of the Bakken, the naysayers said the Bakken was good for North Dakota but that was about it.

I particularly enjoy citing this post from another blog as an example: “Don’t believe it. There’s some oil to be gotten out of Bakken, and it’s going to be exploited. But the “bonanza” is nothing but hype.” — June 25, 2010.

“Some oil to be gotten out of the Bakken … Nothing but hype.” Wow.

I checked on the link and found Bakken Oil Hype at The American West at Risk blog.

Wow is right.

The USGS had a forecast in 2008 on the amount of oil in Bakken. The above blog post gave this info:

5% chance of finding a total of 4.3 billion barrels,

95% chance of finding a total of 3.1 billion barrels, and

50% chance of finding a total of 3.6 billion barrels (the famous USGS “mean” estimate).

The ‘Bakken is all hype’ discussion

The linked post is dated June 25, 2010, which is 2½ years ago. In terms of Bakken developments, that is a long time ago.

Let’s see the article’s description from this distant time.

First, the straw man.  Referring to conversations circulating at the time…

The emails and websites say that Bakken would solve all our petroleum “needs.”

I hadn’t tuned in to the Bakken story then, but I rather doubt anyone was claiming that oil from North Dakota would “solve” our oil needs let alone “all” of them.

Next paragraph:

Don’t believe it. There’s some oil to be gotten out of Bakken, and it’s going to be exploited. But the “bonanza” is nothing but hype.

About at the end of the article:

Last word: It takes a long time and thousands of expensive (~$4-8 million each) wells to fully develop a field the size of the Bakken, which means that the Bakken can have only a barely discernible impact on daily US oil supply throughout the life of the field.

Now let’s take a look at developments in the North Dakota Bakken field

You can find lots of data from the North Dakota Industrial Commission here.

Data for the Bakken-only drilling can be found here. The data from about 3,000 additional wells outside Bakken are excluded from that info.

Let’s look at May 2010, the month before the above article was posted.  There were 1,593 wells in the Bakken field. They produced 6.9M barrels that month, an average of 223,759 per day. 

That is a large jump from two years earlier. In May 2008, there were 1.8M barrels for the month or 58,890 per day from 582 wells.

Now let’s look at September 2012.  Last month there were 19.9M barrels of oil produced, or 662,428 per day from Bakken-only wells. There were 4,629 producing wells.

Here’s the numbers again:

• 5-08  / 5-10  / 9-12
• 1.8M / 6.9M / 19.9M – total barrels for month
• 59K / 224K / 662K – barrels per day
• 582 / 1,593 / 4,629 – producing wells

If you want a really rough trend line, that looks to me like something in the range of tripling from 5-08 to 5-10 and tripling again by 9-12.

‘Hype’, no ‘bonanza’, and ‘barely discernible impact’ are subjective words. Maybe it’s just my perspective, but I don’t think those phrases can possibly describe 662K barrels a day from 4,600 wells.

What about cumulative production?

From June 1996 through May 2010, production in the Bakken field of North Dakota was 124.1M barrels. From June 2010 through September 2012, production in Bakken was 340.6M barrels. (I haven’t bothered to input the data before June ’96 into the spreadsheets I’m using. Production in 6-96 was 91K per month, so it won’t change the analysis much.)

Current guesses that I’m tracking are suggesting North Dakota production will hit 1M bopd sometime in the next year or two.  That would be about 365M barrels a year.

How’s that compare to USGS’s 2008 estimate that the Bakken Oil Hype post is so dismissive of?

The mid-point is 3.6B barrels.

Production from 5-10 to 9-12, about 2 ½ years, was 340M barrels, or about 9.4% of the 2008 estimate.  Daily production of 1M bopd expected in the next few years would be 365M per year, or 10.1% of the field.

An oil field that is produced 9% of the estimated field size in 2½ years is a big deal. For annual production to draw close to 10% of the estimated field is amazing.

Current production from Bakken is about 12% of total U.S. production. (Bakken 662K bopd from above divided by 5,647K bopd for the US in 2011 from EIA = 11.7%).

12%.

From one field.

Can we all agree that is more than a discernible impact?

Final point to discuss.  The post mentions that developing the field will take a long time, involve thousands of wells, with costs of $4M to $8M each.

Yup. That’s what it would take.

And that is exactly what has happened.

There’s already 3,036 more producing wells in Bakken than when the post was written. The cost per well is running in the range of $6M to $8M or even higher (don’t have a convenient link for that – sorry).

For the last two quarters, the well count has increased about 470 wells each quarter. That pace would increase the well count about 1,800 per year.

Full development of the field could take another decade or more. Another 10 or more years of the same high intensity drilling pace we’ve seen the last couple of years.

Four lessons I draw from this:

• Bakken potential is not hype, the field is a bonanza, and it is already having far more than a “barely discernable impact” on U.S. production.
• The 2008 forecast is probably understated. (Yeah, yeah, I’m really late to the party on that conclusion.)
• Naysayers missed the boat on Bakken.
• Peak Oil is foolishness because nobody knows what oil fields are yet to be discovered or how much oil will eventually be found in the fields we already know about.