North Dakota cashes in on oil

[Don]

http://news.bbc.co.uk/2/hi/programmes/w ... 097985.stm

A recent oil boom in North Dakota has turned local farmers into millionaires and pushed the unemployment rate to the lowest in the country.

Billions of barrels of oil are estimated to be in the area, and thanks to a new drilling method, North Dakota is now firmly on the US oil map.

For more than 50 years, experts have known about oil in the Bakken and Three Forks formations, a rock bed spanning 200,000 sq miles (520,000 sq km) underneath the surface of North Dakota, Montana and Saskatchewan.

But it was not until the horizontal drilling technique and hydraulic fracturing came into play this decade that oil in North Dakota became economically viable.

Now companies are able to drill down thousands of feet and then turn to drill horizontally, allowing for a single well to reach more oil.

Before this latest leap in technology, on average every third well in the US was productive, says Lynn Helmes, director of the Department for Mineral Resources in North Dakota.

"To drill into an unconventional resource like the Bakken and Three Forks, where more than 99 wells out of 100 are actually productive, is unthinkable in the oil and gas business."

In 2010 alone, 833 drilling permits have been issued by the state of North Dakota and 140 rigs are drilling in the Bakken and Three Forks formation, according to a report by Pritchart Capital, an energy investment bank.

Twice as many rigs have been drilling in the state since the beginning of the year.

Officials such as Ms Helmes estimate there are up to 500 billion barrels of oil in the area, 4.3 billion of which are expected to be recoverable immediately.

That is already 18 times the annual oil production from Alaska, or twice the annual imports from Opec countries to the United States.

The current daily production of 320,000 barrels makes the state of North Dakota the fourth largest oil producer in the US, only trailing Texas, Alaska and California.

But experts expect more than 400,000 barrels daily in the future is possible. That would be a 400% increase since 2005.

"The best growth that we've had in US domestic production is deep water drills in the Gulf of Mexico, which has been greatly moderated because of the moratorium and new regulations," says Barry McKennitt, executive director at the National Association of Petroleum Investment Analysts.

"Adding 400,000 a day is extremely important, if you lose 200,000 in a day in the Gulf of Mexico."

But with a daily oil consumption of almost 19 billion barrels in the US, these latest finds have to be put into perspective, warn many experts.

"This is attractive because it's onshore and it's domestic," says Frank Verrastro, senior vice president at the Center for Strategic and International Studies.

"US production has been going down dramatically and a lot of folks were counting on offshore production to slow the decline."

There are still huge oil reserves in the Gulf of Mexico - over 10 billion barrels, says Mr Verrastro - but the economic and political incentives are driving people inwards.

The moratorium on offshore drilling was lifted by the Obama administration in October, but new regulations mean that most rigs will sit idle for months to come.

"It will absolutely have an impact on the onshore," says Steve Grape at the Energy Information Agency. "There is a land rush going on all over the country."

Continental Resources, an oil exploration and production company, is part of that rush. Fuelled by well completions in the Bakken, the company expects a 30% production growth in 2011.

"Here in the Bakken we're adding 20 wells a month, so (we have) roughly about 250 wells producing," says Russel Atkins, an area supervisor for Continental in North Dakota.

"But ask me that tomorrow and there will be a different number."

There are dangers, warn some environmental groups. The chemicals used in the deep extractions process, called hydraulic fracturing, can contaminate drinking water.

With a new pipeline connection in the works, North Dakota hopes to increase its influence in the domestic oil market and offset some of America's foreign oil needs.

But experts warn that no single discovery or technological advancement could provide a viable alternative to its often politicised dependence on foreign oil.