The Bakken Oil Formation: Big Or Boondoggle ?  

I keep seeing references in various out of the way periodicals about the amazing oil resource contained within the Bakken formation in North Dakota and Saskatchewan, with most of them claiming it contains 10 times as much oil as current US reserves (frequently supplemented with many exclamation marks !!!!!).

Lou Grinzo has also noticed this phenomenon, and has gone to the trouble of digging up all the reference data. Its far from clear how much of this oil (which is reputably of very high quality) can be extracted and how fast it would happen if someone could make it profitable - but worth keeping an eye on nevertheless.

I keep seeing mention of this mysterious entity in the oil world, the Bakken oil field, and how it has A Lot Of Oil. What's going on here? Is this just another case of an oil field being hyped beyond all reasonable bounds, as with other finds we've heard about in recent years, or is it truly a game changer? As with many such examples, the truth is somewhere in between, and the more you look into this specific example the more the entire world's oil situation reveals its complexity.

As explained in Technology-Based Oil and Natural Gas Plays: Shale Shock! Could There Be Billions in the Bakken? (9 page, 358KB PDF), written by the US Dept. of Energy in November 2006 ...

So, where does all this leave us?

* Bakken seems to have an undeniably large amount of oil in place, approximately 400 billion barrels.

* The amount of that oil that's technically recoverable is open to wildly varying estimates, from 3% to 50%, or 12 to 200 billion barrels.

* How quickly can the oil be produced? Even assuming that the transportation issue is solved, which it surely would be with billions of barrels of oil hanging in the balance, it's not at all clear in anything I could find what kind of technical hurdles would have to be overcome to move from exploratory wells to, say, a couple of million
barrels/day.

* Similarly, it's anyone's guess how quickly that production could ramp up to whatever level is feasible.

* Bakken seems to be a near perfect example of the dual effects of rising market prices and advancing technology making a previously known (discovered in 1953, remember), but only marginally developed, oil and natural gas reserve suddenly far more attractive.

* As for what Bakken means in the context of the peak oil discussion, it is what it is, as they say on at least one reality TV show. If in the coming years it turns out not to produce much oil per day, then it will have no discernible effect on projections of when the peak arrives or how tightly the oil crunch will squeeze us. If we are indeed on path for a 2011/2012 peak, then it's very hard to imagine how Bakken could come into play in a significant way before then. A moderate amount of oil/day from Bakken will likely contribute to maintaining a production plateau for years, which is my long standing prediction of where we're headed, for exactly the economic and technical reasons mentioned above. A high level of daily production from Bakken would trigger some interesting (to put it mildly) market dynamics. We would possibly see OPEC trim their output to support a market price they like, even as Bakken ramps up and other non-OPEC producers continue to experience production declines.

* Bakken will likely become the object of seemingly infinite discussion in the coming years as cornucopians try to claim it's "proof peak oil was wrong" (and I'm curious why we haven't seen them doing this already, frankly), and the Apocalypticons dismissing it entirely (ditto).

* My recommendation for the short run: Chill out. Wait for the truth to unfold. Don't jump to conclusions. Eat your veggies, exercise, and floss your teeth.