Wednesday, June 04, 2008

Forget Alaska, There's 40X As Much Oil in N.D.

June 3 (Bloomberg) -- The Bakken formation is a sprawling deposit of high-quality crude oil beneath the durum wheat fields of North Dakota, Montana and southern Saskatchewan and Manitoba. The Bakken may give the U.S. -- the world's biggest importer of oil -- a new domestic energy source at a time when demand from China and India is ratcheting up the global competition for supplies and propelling average U.S. gasoline prices to almost $4 a gallon.

And unlike the tar from Canada's oil sands, Bakken crude needs little refining. Swirl some of it in a Mason jar and it leaves a thin, honey-colored film along the sides. It's light - -almost like gasoline -- and sweet, meaning it's low in sulfur.

Best of all, the Bakken could be huge. The U.S. Geological Survey's Leigh Price, a Denver geochemist who died of a heart attack in 2000, estimated that the Bakken might hold a whopping 413 billion barrels. If so, it would dwarf Saudi Arabia's Ghawar, the world's biggest field, which has produced about 55 billion barrels (see chart above).

In contrast, there are 10.4 billion barrels estimated to be recoverable in Alaska's Arctic National Wildlife Refuge (ANWR), which remains off limits. On the other hand, North Dakota is open for business.

14 Comments:

At 6/04/2008 10:16 PM, Anonymous Anonymous said...

The USGS estimates 3.0 to 4.3 billion barrels of technically recoverable oil having a mean value of 3.65 billion barrels in the Bakken Formation.

It is the equivalent of 1.2 months of global oil supply at current production levels or 6 months worth of current US consumption. A drop in the bucket for financial literates.

 
At 6/04/2008 10:53 PM, Anonymous Anonymous said...

Anon 10:16 pm...from the article you cite...

A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency's 1995 estimate of 151 million barrels of oil.

The reason fore the increase is technological advances so it's reasonable to expect that advances in recovery methods can yield even more oil.

What hasn't been reported widely in the media is the oil rush occurring around N.D. Some towns have zero homes for sale and a zero vacancy rate.

 
At 6/04/2008 11:19 PM, Anonymous Anonymous said...

I do believe CD here has noted the Dakota's economic out performance, but don't recall the good Professor indicating oil at the cause before.

Almost hard to believe, though. In the dead of winter, where do the weather men on the local news here in Florida always point to and laugh as having some of the most brutally cold temperatures? Yeah. North and South Dakota.

 
At 6/04/2008 11:27 PM, Anonymous Anonymous said...

North Dakota was pumping more oil 20 years ago than today. It seems that Montana production peaked in 2006.

The point is that Bakken is hook, line and sinker hype. Technocornucopians beware.

 
At 6/05/2008 12:58 AM, Blogger randian said...

Might be hype, might not. How about letting oil drilling companies spend their money to find out? Or, since you know a thought experiment is more factual than actual experience on the ground, you'd rather magnanimously help them save some money by forbidding drilling?

 
At 6/05/2008 2:04 AM, Blogger Jack Miller said...

Your chart includes significant errors and misrepresentations. The amount shown for Saudi Arabia is the amount produced so far, not the total reserves. The amounts shown for the Bakken are for total oil in place, which is a very different number than recoverable reserves at the current price and with current technology. Bakken recoverable was estimated at 4.3 billion but ANWAR could easily be way off one way or the other. We will not know until we drill.

 
At 6/05/2008 5:58 AM, Anonymous oilman said...

200B is the accepted number for the Bakken formation, and even that is rather optimistic. The recovery rates are all dependent upon technology and your drilling in basically 10' thick layer horizontally.

BTW, remember how you said that the gov't was keeping all this great US oil off limits? No one is stopping drilling on the Bakken formation in Montana or in ND. It just costs 5M or more per well, plus 500k per day per fracture stimulation leg, of which you need 2-3.

The good thing is, ND is the best state in the country for geological records and laws.

 
At 6/05/2008 9:01 AM, Blogger Jack Miller said...

The oilman's comment is like the farmer who allowed two suitors for his daughters hand to show his farming skills. The first suitor, who was disliked by the farmer, was given the option to grow anywhere he liked on the 15% of the land that was poor. The second suitor, who was liked by the farmer, was permitted to farm on any of the remaining land. The first suitor spent more to till this hard land and more to fertilize this weak soil. Even so, his production was far less than the second suitor.

The comment on technology is behind the curve. In the above analogy, the second suitor was allowed to use tractors and the first suitor had to plow with mules. The reason the leases are being bid up like crazy in the Bakken is because the the technology of fracing is producing great results. Still, give US drillers access to the good stuff and a lot more will be produced at a lot lower costs.

 
At 6/05/2008 11:22 AM, Blogger Marko said...

Did anyone else live through the 70s? Doesn't this claim that we are running out of oil sound familiar? Didn't it turn out to be B.S.?

 
At 6/05/2008 11:48 AM, Anonymous Anonymous said...

Ummm, the US is running on empty.

 
At 6/05/2008 6:18 PM, Anonymous Luis D said...

Dr. Perry,

I have always enjoyed reading your blog and I think it has great Econ info.

But, this large oil number you present here (413 Billion barrels)is only possibly true, not a widely accepted fact.

Today, just a few minutes ago, this info was presented on CNBC by Larry Kudlow on his TV show as a basically uncontested and accepted fact...which surely it is not.

I really like your bolg, but i think you need to present info in a more careful manner, b/c if not, it is taken out of context by others...and CNBC is a big audience. Just a suggestion

 
At 6/05/2008 9:22 PM, Blogger OBloodyHell said...

> I really like your bolg, but i think you need to present info in a more careful manner, b/c if not, it is taken out of context by others...and CNBC is a big audience.

Dude, he's repeating Bloomberg, the linked source. If you want to complain about the quality of the info, you should be concerned with them, not him.

If you think Bloomberg isn't doing a good job, you might want to suggest that you don't trust them as a source, then cite reasons.

I'm going to assume that CNBC was quoting Bloomberg, too, not Dr. Perry.

 
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