More good stuff on the open frontiers, energy edition – 1-16-14

Amazing things going on around us. Here is my latest list of a few articles about energy that help me make sense of the radical change taking place. Tomorrow, tidbits of the other newly open frontiers.


1-6 – CNS News – Saudi Billionaire Prince:  Fracking Competitively Threatens ‘Any Oil Producing Country in the World’ – Prince Alwaleed Bin Talal is pushing the Saudi government to diversify the country’s economy. Currently 92% of government revenue is derived from oil, he says. The rapid expansion in output caused by combining horizontal drilling with staged hydraulic fracturing presents a serious threat to any country that is reliant on oil. Big news. Bigger issue.

A delightful “problem” to have – 1-7 – Bismarck Tribune from the New York Times – Oil glut stirs up political brew – The surging production of crude is opening a discussion of whether to allow more exports of crude. Seems we have so much unrefined light, sweet crude we don’t know what to do with it all.  As a result, the politicians are getting involved. I wish we as a country and planet had another half-dozen “problems” like this.

(By the way, what Peak Oil?)

More downside to the Bakken boom – 1-10 – The Dickinson Press – Criminal defendants in fed court up 31 percent in western N.D. in 2013 Increase is primarily for drug trafficking. Case load doubled since 2011. Elsewhere in state, number of people charged criminally in federal court is down.

1-16 – Via Meadia – What to Make of the Great Poland Shale Fail – The hope a few years ago was Poland could have a century or more of gas in their shale fields.  A fourth major company has given up on pulling commercial quantities of gas out of the shale. Apparently the geology isn’t regular enough to do so. In addition, the regulatory environment is adverse to long-term time horizon needed for development.

Article highlights the unique combination of factors in the U.S.: stable regulations, particular geology favorable to horizontal drilling, available capital, private ownership of (most) mineral rights, infrastructure, entrepreneurial drive. Not many places in the world where all those factors come together in one place.

North Dakota and Norway – 1-15 – Million Dollar Way – How Big Might the Bakken Be? – Larger than the fields in Norway and far higher per capita than Norway. Article points out production in ND is soon to hit 1M bopd. Here’s his estimate of max production:

estimates are that North Dakota will produce 2 million bopd (barring any geopolitical disruption). 

I agree with the only factor that could prevent hitting that production level.

The comparison of ND and Norway is amazing. I couldn’t paraphrase the comparison well, so will quote Mr. Oksol with my comments in [brackets]:

So, Norway:

  • 1.5 million bopd
  • 5 million Norwegians [in Norway]
  • every Norwegian is a millionaire [divide their Legacy Fund by number of citizens gives a number > $1M]
  • reserves of 20 billion bbls
  • Norway’s “Legacy Fund” invested in equities and property around the world

Compare with North Dakota:

  • 1 million bopd [and rising with no end in sight]
  • less than a million North Dakotans [no immediate count how many Norwegians that includes]
  • CLR suggests Bakken reserves are significantly greater than 20 billion bbls
  • North Dakota’s “Legacy Fund” invested in cash at 0.02%

Per capita, the oil could have bigger impact on North Dakota residents that the North Sea oil does on Norwegians.

Biggest difference? North Dakota hasn’t started to figure out how to invest with a hundred year time horizon. They won’t be needing that cash pile by the end of the summer (or anytime in the next 40 summers), so it ought not be in cash.

Why is the comparison to Norway so entertaining?  In case you didn’t know, a large portion of the residents in North and South Dakota, along with Minnesota, trace their ancestry back to Norway. Many of us only need go back to our parents or grandparents to find the migration. Hint: look at my last name.

1-2 – Oil Patch Dispatch – Accounting firm brings expertise into the Oil Patch to help people, businesses keep up with the boom – Tax clients walking in the door with a $500,000 royalty check need tax and financial planning help. A business that gets a call from their bank asking the customer to remove $5 million from their accounts today so the bank can  manage their balance sheet need advice. Ms. Dalrymple interviews several staff from two different firms about how they are helping their clients and coping with their own challenges.

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