North Dakota oil production skyrockets on Bakken Shale drilling and development

Currently the fourth-largest oil producer in the United States, North Dakota is only surpassed by Texas, Alaska and California – nonetheless, mounting oil production from North Dakota's prolific Bakken Shale may soon change that.

The US Energy Information Administration recently focused on the recent upward trend oil production from North Dakota in its report entitled, "Rising North Dakota Oil Production: Recent Trends and Future Prospects."

Since 2005, oil production in North Dakota has tripled to an average of 307,000 barrels of oil a day in 2010 – a number that is likely to jump again in 2011. In January 2011, oil production in the state reached an average of 341,000 barrels of oil a day, and in February, North Dakota's oil production averaged 360,000 barrels of oil a day, showing a definite trend upward.

By using horizontal drilling and hydraulic fracturing in the Bakken Shale formation, operators in North Dakota have increased Bakken oil production from less than 3,000 barrels of oil a day in 2005 to more than 230,000 barrels of oil a day in 2010.

Drilling in the state has certainly increased, as well. According to the most-recent report from Baker Hughes, North Dakota currently has 158 rotary drilling rigs active in the state – all of which are drilling for oil. At the same time in 2005, there were only 22 rigs drilling.

Additionally, the rate of production growth in North Dakota far out-paces any other state in the Union. Over the last five years, oil production growth has increased some 40 percent in North Dakota, in comparison to less than a 4 percent increase in Texas and dwindling oil production rates in California and Alaska.

The EIA expects oil production from North Dakota to continue climbing, as elevated oil prices support further development of the Bakken Shale and underlying Sanish Three Forks formation.

Furthermore, the 2008 USGS assessment of the Bakken formation estimated some 3 to 4.3 billion barrels of recoverable oil, a significant increase from previous estimates. (The USGS plans to start a new assessment of the Bakken in October 2011.)

Recently, the North Dakota Department of Mineral Resources projected that production from the Bakken formation could possibly double, jumping to as high as 700,000 barrels of oil a day in the next four to seven years.

Increased oil production in the state is prompting investment in pipelines and infrastructure to transport the crude to eager US markets. In addition to a number of pipeline expansion and construction projects, some companies are resorting to railroads to deliver oil production from the state.

A mega-solution, TransCanada is hoping to start its Keystone XL Pipeline in 2013, but the construction project, which will span two countries and myriad states, is still undergoing the approval process with the US government (although the House voted to expedite the Obama Administration’s decision on the pipeline just this week).

Also facing processing and transport constraints, North Dakota's natural gas production has grown as associated production to the oil.

Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.

New Lucius development shows gaining strength of the US Gulf

This week, US independent Anadarko Petroleum (NYSE:APC), super-major ExxonMobil (NYSE:XOM) and other project partners signed a unitization for the Lucius oil and gas field in the ultra-deepwaters of the US Gulf of Mexico.

Discovered in 2009, the Lucius oil and gas field spans Keathley Canyon Blocks 874, 875, 918 and 919, which had different project partners and differing operators, requiring a new break-down to move forward.

Following the unitization, Anadarko will serve as the operator of the Lucius field with 35 percent interest. Lucius partners include ExxonMobil with 15 percent, Plains Exploration and Production Company (NYSE:PXP) with 23.3 percent, Apache (NYSE:APA) with 11.7 percent, Petrobras (NYSE:PBR) with 9.6 percent and Eni (NYSE:E) with 5.4 percent interest.

The unitization moves the project one step closer to a project sanction on the development of the field, which is now expected for later this year -- a major vote of confidence for oil and gas operations in the US Gulf.

Development plans for Lucius call for a truss spar capable of processing more than 80,000 barrels of oil and 450 million cubic feet of natural gas a day.

Additionally, the Lucius project partners have signed an agreement with the partners on the Hadrian South field, to process the natural gas of the nearby field through the Lucius production facility -- making Lucius a production hub in the ultra-deepwaters of the Keathley Canyon.

Following the Deepwater Horizon accident and Macondo oil spill, and the subsequent permitting delays for drilling and development as regulators reorganized operations and requirements, the Lucius field development is the third major project to be announced for the US Gulf of Mexico.

Chevron's (NYSE:CVX) $7.5 billion Jack-St. Malo and $4 billion Big Foot developments have gotten the ball rolling on contract awards for oilfield service companies in the Gulf of Mexico. Additionally, deepwater drilling permits have been issued, and offshore men and women are getting back to work.

With the Lucius project sanctioning imminent, major projects are picking back up in the Gulf, showing operators are eager to continue working in the waters offshore the US.

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Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.

International shale race takes off

While shale gas production in the US reached 4.87 trillion cubic feet in 2010, shale drilling and production is slow-going in other countries.

Nonetheless, the EIA recently released a report covering 48 shale gas basins in 32 countries, asserting that shale gas is a global phenomenon with 6,662 trillion cubic feet of unconventional resources worldwide.

With the news this week that Chevron has hired oilfield services firm Halliburton for drilling services on its Polska shale project in Poland, the international shale race heated up a bit.

International countries around the world are eager to tap into shale reserves, using techniques and technologies, namely horizontal drilling and multi-stage fracturing, perfected in the unconventional formations of the US and Canada.

Both India and China are making strides to begin drilling shale. National oil company CNPC joined forces with super-major Shell to develop a well manufacturing company to focus on shale gas and CBM drilling and development. Additionally, India is drilling its first shale gas wells, as well as awarding shale gas blocks for development.

In South America, shale drilling in Argentina is also picking up through efforts in the Neuquen Basin.

While France has recently banned the use of hydraulic fracturing for oil and gas resources in the country, Toreador Resources, an active shale explorer in France, stresses that it can develop its Paris Basin resources without the technology.

The Ukraine claims to hold the world's largest shale reserves, with the Ministry of Environment and Natural Resources in the country calling for international investors to study its shale gas deposits.

The drilling and development of shale resources across the globe may prove the perfect solution to growing demand for energy outpacing current production levels.


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Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.

Alaska bids to increase oil production

Oil and gas are abundant in Alaska. Despite the harsh weather, the most northern state of the US is home to somewhat easily produced hydrocarbons, as well as a strong network of pipelines to connect that production to US markets.

Nonetheless, production in Alaska has been waning. Just this year, the LNG liquefaction and export terminal located on Alaska's Kenai Peninsula closed after 40 years of production -- and delays in obtaining drilling permits turn off operators. (After dropping its plans for drilling this year, Shell is working to drill in the Beaufort and Chukchi Seas offshore Alaska in 2012.)

To top it off, North Dakota's Bakken Shale is ramping up production at record rates, with more and more rigs drilling and infrastructure projects being awarded left and right. In fact, recent data revealed that oil production in North Dakota may well outpace Alaska by 2017.

This is despite the fact that a recent study found that Alaska's Outer Continental Shelf could produce 10 billion barrels of oil and 15 trillion cubic feet of gas.


Working for Change

To change the tide, Alaska's officials have been on the offensive, trying to boost oil and gas production in the state through oil-friendly initiatives and supportive legislation.

Drawing the line in 2010, the State of Alaska filed a lawsuit against the Secretary of the Interior to overturn the federal moratorium on offshore drilling in Alaska's Outer Continental Shelf.

Recently, Alaska Senator Lisa Murkowski introduced legislation to improve permitting offshore Alaska, recognizing that the "endless regulatory loop" is costing the state jobs and production.

"We have companies that have spent more than five years and billions of dollars attempting to conduct offshore exploration and production in Alaska, but have been unable to secure the necessary permits from EPA," Murkowski said. "It's clear that this process is not just overly costly and time-consuming, but simply does not work."

In April 2011, Alaska Governor Sean Parnell called on President Barack Obama to support the state's goal to increase the flow of oil through the Trans Alaska Pipeline System (TAPS) to 1 million barrels per day in the next 10 years.

Last week, Gov. Parnell and Natural Resources Commissioner Dan Sullivan revealed that Alaska plans to sell nearly 15 million acres of state-owned land and waters in October. The acreage up for grabs includes 2 million acres in the Beaufort Sea, 5.1 million acres on the North Slope and 7.6 million acres in the North Slope foothills -- and could hold up to 6 billion barrels of oil and 45 trillion cubic feet of natural gas.

"Releasing 30 million barrels of oil from the Strategic Petroleum Reserve is bad policy," Gov. Parnell said. "This decision only provides the nation with 30 days of additional oil supply. It will have no long term impact. The real Strategic Petroleum Reserve is Alaska, which has the potential to provide more than 30 billion barrels of oil over three decades. Developing Alaska's vast hydrocarbon resources will supply the nation with billions of barrels of domestic crude. It will provide tens of thousands of high paying jobs and it will generate hundreds of billions of dollars in revenue for the federal government. The right policy call for the nation is to develop Alaska's resources."

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Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.