The Bakken Oil Field has been a topic of discussion for many years. When I was a kid I remember my dad’s cousin talking about all the oil they were sitting on in Western ND. We all thought he was dreaming but now 30 years later he has two oil wells on his land.
A combination of technological advancements, deep sea drilling issues and high oil prices have made the Bakken Oil Field one of the hottest prospects in the western hemisphere. Along with the advancements in technology, there has been a steady stream of upgrades to the amount of recoverable oil industry experts expect. The latest analysis came from Continental Resources which is one of the largest oil drillers working in the Bakken Formation. Continental CEO Harold Hamm recently expressed on CNBC that their analysis leads them to believe that once fully developed, up to 24 Billion barrels of oil could be recovered from the Bakken.
Fully developed means wells on 320 acres spacing or 2 oil wells for each section of land. For this to come to fruition Hamm says we need to maintain oil prices above $60 per barrel and have a favorable regulatory environment. The infrastructure in Western ND and Eastern Montana is currently a bottleneck with a lack of housing for oil workers. There has also been a transportation bottleneck getting the oil to market as well but that has eased with pipeline expasions in the past couple years. Drilling horizontal wells is also a very capital intensive project as each of these wells costs around $6.5 million to drill according to Hamm. With oil prices where they are right now however, there is no lack of capital chasing after the Bakken Oil. At last count there was a record 171 drilling rigs operating in ND with 95% focused on the Bakken and Three Forks formations in western ND.
With warmer weather approaching tent cities will begin to pop up wherever there are oil rigs. Most of the towns where the drilling is taking place are very small having populations of 1000 or less prior to the recent boom. Since Western ND went through a painful boom and bust in the late 70s and early 80s people have been slow to build housing. The mini-bust in 2008 and accompanying credit crunch has also slowed spending on infrastructure and housing. It’s now becoming very apparent however that this boom is real and should last for 20-30 years so there should be a rapid deployment of capital for housing and other services.
How much oil is 24 billion barrels? Lets put it this way, if that number turns out to be correct, it would effectively double the U.S. oil reserves. With an insatiable appetite for gas and diesel in this country that is definitely some badly needed good news.