Bakken Oil Output Seen Growing With Drilling ImprovementsDan Murtaugh
Improved drilling techniques will help oil production in the Williston Basin outpace steep well-decline rates, boosting output by more than 70 percent to 1.7 million barrels a day by 2020, according to Wood Mackenzie Ltd. energy analysts.
Producers such as Continental Resources Inc. are drilling wells faster and have had early success with downspacing, or increasing the number of wells per acre, said Jonathan Garrett, a Wood Mackenzie upstream analyst in Houston. They are also beginning to tap into more shale rock layers than the Bakken formation, which is part of the basin and has been the primary source in making North Dakota the U.S.’s biggest oil-producing state, after Texas.
The research released today by Wood Mackenzie, an energy consulting firm based in Edinburgh, comes amid increasing concern in the industry over potential hurdles of shale wells. Their output declines by 60 to 70 percent in the first year, according to Austin, Texas-based Drillinginfo Inc. Traditional wells take two years to fall by about 55 percent before flattening out.
“Even if the rig count stays flat, drilling efficiencies will grow and operators will continue to downspace their plays,” Garrett said by phone yesterday. “Even with steep decline rates, you should still be able to add production.”
Production in the Williston Basin, which is primarily in North Dakota and stretches into parts of Montana, Wyoming and South Dakota, will average 1.1 million barrels a day in 2014, Garrett said. Output averaged 937,000 barrels a day last year, according to North Dakota Pipeline Authority data.
Bakken crude priced at a pipeline hub in Clearbrook, Minnesota, weakened by 50 cents to a discount of $2.25 relative to U.S. benchmark West Texas Intermediate at 12:48 p.m., according to data compiled by Bloomberg.
Oil and gas from the Bakken and other shale formations helped the U.S. produce the equivalent of 87 percent of its energy needs in 2013, the highest level since 1985, according to data from the Energy Information Administration. The U.S. imported 7.7 million barrels of crude a day in 2013, the least since 1996.
Because shale production declines so fast, companies need to finish new wells constantly to keep rates up. Bad weather and well shut-ins reduced North Dakota’s Bakken output by 46,000 barrels a day in December compared with the previous month, the largest drop ever.
Shale wells are drilled by boring horizontally through an underground rock layer and then injecting a high-pressure mixture of water, chemicals and sand to create micro-fissures in the rock through which gas and oil can seep.
“Fracking requires a lot of water, and when temperatures are below zero you can’t frack,” said Virendra Chauhan, an oil analyst with Energy Aspects Ltd. in London, who expects Bakken production to average about 1 million barrels a day this year and grow to 1.1 million barrels a day by 2017. “U.S. production is definitely becoming a lot more seasonal because of weather.”