November 2013 - The Bakken magazine

NOVEMBER 2013

Plus:The Making of an Multi Continent Energy Powerhouse Page 24

AND: A Better Way To Track Shale ProductionPage 32

Road Construction Worthy of AttentionPage 30

New Technologies, Infrastructure Improving What We Know (And See) Page 16

www.THEBAKKEN.comPrinted in USA

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THEBAKKEN.COM 5

CONTENTS NOVEMBER 2013 VOLUME 1 ISSUE 8

DEPARTMENTSMAKING IT

30 Historic ConstructionA U.S. Highway 85 bypass rerouting the oilfi eld corridor traffi c around Watford City, N.D., is in progress. BY THE BAKKEN MAGAZINE STAFF

IN PLAY32 Shale Production Reporting’s New Era

The EIA rolls out a system tailored to track and predict shale oil production.BY THE BAKKEN MAGAZINE STAFF

Pg 16 PRODUCTS & TECHNOLOGY

Aware Of The FlareHow innovative technologies and strategies combined with a better understanding of Williston Basin shale gas are transforming the practice of fl aring. BY LUKE GEIVER

6 Editor’s NoteA Proving Ground For Problem SolversBY LUKE GEIVER

8 ND Petroleum CouncilNew PerspectiveBY TESSA SANDSTROM

10 Bakken NewsBakken News and Trends

ON THE COVER: A Steffes Corp.-engineered flare creates a cleaner, more translucent flame.PHOTO: STEFFES CORP.

Pg 24 INFRASTRUCTURE & CONSTRUCTION

Leveraging The Energy Culture

North Dakota and Norway share more than cultural history. The two are collaborating to build an energy powerhouse. BY LUKE GEIVER

The BAKKEN MAGAZINE NOVEMBER 20136

A Proving Ground For Problem Solvers Luke GeiverEditorThe Bakken [email protected]

EDITOR'S NOTE

It’s no coincidence that fl aring is the hottest topic for regula-tors and industry decision makers responsible for developing the Williston Basin’s oil and gas resources. The associated gas created during the oil retrieval process is valuable, unique and, unfortunately, underutilized. The image of the spiraling fl ame burning constant against the backdrop of a North Dakota or Montana fi eld is practically a mascot for those pointing to what’s wrong with the oil and gas development because of the shale play. Although to some, there is a debate about why gas produced from a Bakken or Three Forks well is fl ared, this month’s feature outlines the real issues related to fl ar-ing, and the solutions being used to address those issues.

In addition to a major effort by both regulators and industry leaders to assess the most fea-sible regulatory solutions to fl aring, technology providers and midstream operators are forcing their stories to be heard. From engineered fl aring solutions that are drastically reducing emissions related to fl ared gas, to onsite compression units capable of stripping out valuable NGLs from well sites that may never be connected to a gathering line due to geographical topography or right-of-way delays, technology providers have moved past the experimental and product testing stage.

Their work reveals the incredible amount of time and investment that has been put into capturing Bakken gas. In the past fi ve years, researchers, fl are solutions providers and gather-ing companies have formulated a better understanding of the components and fl ow rates of a Williston Basin gas stream. The new insight, combined with proven technologies and a massive ramp-up in gathering-related infrastructure, has reframed the story of fl aring. No longer is it dominated by a theme of waste, loss or economic insignifi cance. Flaring has evolved. Brian Ce-bull, president of a company formed specifi cally to address and reduce the practice, might have the most telling reason why the issue has changed. “We are proud to be a part of the solution,” he says. Cebull is not alone in that sentiment.

Although road construction seems to pale in comparison to fl aring, the story, Historic Construction, shows how another major issue in the Bakken has been addressed. This fall, Knife River Corp. started work on the largest road construction project the fi rm has ever undertaken in North Dakota. The work will transform U.S. Highway 85, the main travel corridor that links service, storage and other oil and gas facilities to the oilpatch near Watford City, N.D. The prob-lem with 85 is that it also runs right through Watford City. The Knife River team is alleviating a huge traffi c problem in the city by building a bypass.

Lynn Westfall, director of energy markets for the U.S. Energy Information Agency, is also serving as problem solver. For the past year, his team worked to build a better shale oil produc-tion model. As Westfall explains, they wanted a better yardstick, one that could more accurately refl ect production trends in the U.S. shale plays.

THEBAKKEN.COM 7

www.THEBAKKEN.com

VOLUME 1 ISSUE 8EDITORIAL

Editor Luke Geiver [email protected]

Senior Editor Susanne Retka [email protected]

Staff Writer Chris [email protected]

Copy Editor Jan [email protected]

PUBLISHING & SALES

Chairman Mike Bryan [email protected]

CEO Joe Bryan [email protected]

President Tom Bryan [email protected]

Vice President, Operations Matthew Spoor [email protected]

Vice President of Content Tim Portz [email protected]

Business Development Manager Bob Brown [email protected]

Account Manager Tami [email protected]

Marketing Director John Nelson [email protected]

Circulation Manager Jessica Beaudry [email protected]

Advertising Coordinator Marla DeFoe [email protected]

ART

Art Director Jaci Satterlund [email protected]

Subscriptions Subscriptions to The Bakken magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.thebakken.com or you can send your mailing address and payment (checks made out to BBI International) to: The Bakken magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Reprints and Back Issues Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or [email protected]. Advertising The Bakken magazine provides a specifi c topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To fi nd out more about The Bakken magazine advertising opportunities, please contact us at 866-746-8385 or [email protected]. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number. Letters may be edited for clarity and/or space. Send to The Bakken magazine/Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email to [email protected].

TM

Please recycle this magazine and remove inserts or samples before recycling

COPYRIGHT © 2013 by BBI International

ADVERTISER INDEX

4 Avitus Group

15 Bartlett & West

13 BakkenJobs.com

14 Frontier Precision, Inc.

36 Highland Projects LLC

23 Hyatt House

26 International Road Dynamics Inc.

28 J-W Energy Company

2 MBI Energy Services

35 Microtel Inn & Suites

27 Oaks Disposal Services LLC

3 Quality Mat Company

34 The Bakken Magazine

18 & 29 The Bakken-Three Forks Shale Oil Innovation Conference & Expo 2014

19 Tri-Pac Engineering

22 Wells Concrete


"One thing is clear: A lot of people leave. No other state faces the [brain drain] problem to the degree that North Dakota does. There's nobody that's worse off than us."

This was the sentiment of Roger Johnson in 2003. Johnson, who served as the North Dakota Agriculture Commissioner at the time, was just one of many who lamented what seemed to be an irreversible trend: young North Dakotans leaving, never to return to the state. In fact, North Dakota was the only state between 2000 and 2003 to lose population, according to an article printed in USA Today in 2004.

But not anymore.Today, North Dakota’s

population is at the highest level it has ever been, thanks to a vibrant economy and tens of thousands of job openings. These economic opportunities have helped North Dakota earn the top spot on MoneyRates.com’s list of Best States for Young Adults for the second year in a row. “A young adult starting out today would benefi t from a place with plenty of opportunity, reasonable living costs and just enough lifestyle amenities to keep things interesting,” wrote Richard Barrington, a Senior Financial Analyst for the website. In fact, North Dakota even has the

highest proportion of adults 18 to 24 than any other state, as many young people return home to North Dakota for jobs or to start their own businesses, while countless others migrate here for a fresh start.

Often, the energy industry and the high wages that come with it are credited for bringing many of these young people here. Many believe all of these jobs require hard labor and may be gone as quickly as they came. This, however, is not true.

While there are many jobs that do entail working long hours in harsh conditions, many more are the long-term professional careers that so many young people once left the

state to pursue. These careers require education, training and skills in computers, math, science, economics, engineering, law, and the trades, among others. In addition, they are located statewide, from Williston to Fargo and Dickinson to Grand Forks and beyond.

In Grand Forks, engineering fi rms like AE2S and architecture fi rms like JLG Architects are growing and hiring as they work to meet the needs and demands of activity in the west. In Fargo, manufacturers like True North Steel and technology companies like Pedigree technologies have grown signifi cantly as they develop the products and

New Perspective

NORTH DAKOTA PETROLEUM COUNCIL THE MESSAGE

YOUTH MOVEMENT: An incredible energy-related economy has vaulted North Dakota into the No. 1 spot for young adults to gain employment.

By Tessa Sandstrom

THEBAKKEN.COM 9

software needed in the oil and gas industry. And, just as these companies provide products and services to the oil industry, countless others provide accounting, communications, legal, and other support to these growing businesses.

While many view these opportunities for growth as a good thing, there are some who ask, What about the quality of life? What about our changing towns?

Surely our rapid growth has come with its challenges, and all too often we become nostalgic for the way it used to be—when we knew nearly everyone we met walking down the street, and how we never had to wait in lines at the grocery store or to be seated at a restaurant. Even I can admit I’ve become nostalgic when I return home to New Town and the outer edges of town seem more and more unfamiliar each time because of the rapid growth.

Yet, I was recently reminded by Lt. Gov. Drew Wrigley that it is all about perspective.

Wrigley was keynote speaker at the Lewis and Clark Fort Mandan Foundation’s Annual Dinner, and he spoke of the transformation we have seen in North Dakota over the past decade, and the nostalgia many feel when looking back. “But,” he said, reminding us that we have come from decades of decline to a new era of prosperity, “You can’t have it both ways. There is nothing nostalgic about our small towns blowing away and our schools closing.”

Yes, we may not know

everyone we meet when we walk down the street, but we forget that for many years in some of our shrinking rural towns, we may not have even met a single person. Yes, we may have to wait in line in a grocery store or restaurant from time to time, but we forget that many grocery stores, restaurants, and other businesses were closing because there were far too few customers to even form a single line.

Today there are more people in these communities than ever before, and we’ve watched as communities large and small have grown, adding new restaurants, retail stores, and venues that will provide the amenities, entertainment and services for which so many young people once left North Dakota. One person working to provide those amentities is Marcus Jundt, an entrepreneur and one of the original investors of Caribou Coffee. Three years ago, he moved from Minneapolis to Williston, calling the small city “the most exciting place in America” outside of perhaps Silicon Valley. In an

interview on CNBC, Jundt said “I simply concluded this: I saw the greatest boom during my lifetime ... and I didn’t want to be 80 years old and look back at my life and say, ‘I missed the neatest thing that has ever occurred in my life.’”

Jundt compared oil development in western North Dakota to the California Gold Rush of 1849. Gold Rush “boomtowns” of that time, namely San Francisco, have since grown and evolved to become the cradle of America’s technological sector. With innovative young people and entrepreneurs entering the state, there is no reason to believe North Dakota cannot build the same kind of future if it so chooses.

The reversal in North Dakota’s population trends cannot be attributed to only one factor or one industry. Rather, it is the result of a constantly growing and diversifying economy where each of our growing sectors—agriculture, energy, technology, manufacturing, etc.—rely on

and augment one another. This has led to an era of entrepreneurialism that likely has not been seen in the state. “There is so much energy, [and] there’s so much activity,” said Jundt. “This truly is an exciting place. ... Here, every industry is a growth business.”

This kind of excitement has attracted people from across America, and if we choose to harness it, we can make North Dakota a place where young people continue to want to live, work and raise their families. And, if you don’t want to meet any more strangers walking down the street, stop and introduce yourself. It could be a young person who, given the opportunity, will become an active citizen and leader in the community, helping drive it and our state toward continued growth and an even better quality of life than we possibly could have imagined.

Author: Tessa SandstromCommunications Manager,North Dakota Petroleum [email protected]

NORTH DAKOTA PETROLEUM COUNCIL

STAY PUT IN NDNorth Dakota has a higher population of people ages 18-24 than any other state.

9.1%PERCENTAGE OF THEPOPULATION AGE 20-24

$11,092AVERAGE ANNUAL FOUR-YEAR COLLEGE COST

5.1%UNEMPLOYMENT RATE FOR PEOPLE AGE 20-24

$644MEDIAN RENTALCOST

RENTAL VACANCY RATE

SOURCE: MONEYRATES.COM


BAKKEN NEWS BAKKEN NEWS & TRENDS

Look Out For LNGNatural gas produced

from the Bakken or Three Forks shale formations might never leave the Williston Basin. In fact, it might be a critical component of future oil and gas retrieval. Multiple compa-nies, acting alone or through joint ventures, are currently working to transform natu-ral gas into liquefi ed natural gas (LNG) for use in high-horsepower engines, including pumping units, drilling rigs and trucks. Considering the numbers presented from a recent Bentek Energy Study on the U.S. natural gas markets

over the next decade, efforts to use shale gas to power high-horsepower operations makes sense. Over the next decade, natural gas demand in the U.S. will rise 27 percent, the study indicates. Supply will increase by 38 percent.

Shale formations such as the Williston Basin or some in Texas will contribute roughly 44 percent of the expected natural gas supply growth during that 10-year period. “These plays hold tremendous potential, and growth from these areas could exceed cur-rent expectations,” the report,

2006 2008 2010 2011 2012 2013* 2014* 2015*

Natura Gas Production*Forecast Case 1

Processing Plant CapacityND Gas Plant Capacity

0200400600800

1,0001,2001,4001,600M

illio

n Cu

bic

Feet

Per

Day

4/1/

059/

1/05

2/1/

067/

1/06

12/1

/06

5/1/

0710

/1/0

73/

1/08

8/1/

081/

1/09

6/1/

0911

/1/0

94/

1/10

9/1/

102/

1/11

7/1/

1112

/1/1

15/

1/12

10/1

/12

3/1/

138/

1/13

250

200

150

100

50

0

New Wells Selling GasNew Producing Wells

New Gas Sales Wells Per Month Number of Wells Per Month

THEBAKKEN.COM 11

BAKKEN NEWS

adding that in the next 10 years, the U.S. will increase natural gas production to 9.1 billion cubic feet per day.

Stabilis Energy, a natural gas liquids (NGL) supplier, and Flint Hills Resources, a petroleum and biofuels refi ner, have partnered to bring fi ve liquefaction facilities to oilfi elds in regions that include Texas and North Dakota. Stabilis will build its fi rst facility in Texas by early 2014. The joint venture is fi nalizing land procurement in North Dakota for facilities that could come online in 2015 or 2016. The Texas facility will feature a production capacity of 100,000 gallons per day. “We believe this venture will allow

Stabilis to rapidly deploy LNG liquifi ers across all of the major oil and gas shale plays in North America,” said Casey Crenshaw, president and CEO of Stabilis Energy.

Through the joint venture agreement, Stabilis will provide LNG transportation, logistics and fi eld services. The com-pany is currently working with oilfi eld customers to plan dual fuel engine conversions.

Eagle LNG Partners, a consortium of Clean Energy Fuels Corp., Ferus Natural Gas Fuels, GE Ventures and GE Energy Financial Services, is also working to get into the LNG industry. Through Eagle LNG Partners, the consortium

is looking to develop, own and operate LNG production facilities that can supply fuel for long-haul trucking, rail, mining, marine and oil and gas services. “Natural gas is revolutionizing the fueling of long-haul truck-ing and other high-horsepower applications,” according to John Shepard, managing director at GE Energy Financial Services. “With massive amounts of do-mestic reserves, America is fac-ing a generational opportunity to move to a more secure, less expensive and cleaner-burning fuel.”

The consortium is consid-ering projects in North Dakota, Ohio, Texas, Florida, Wash-ington and Colorado. Clean

Energy Fuels is experienced in developing, constructing and operating micro-LNG plants, and Ferus Natural Gas Fuels has expertise in cryogenic and micro-LNG plants along with cryogenic logistics.

Dick Brown, CEO of Ferus Natural Gas Fuels, said the company has learned from customers that LNG needs to be delivered to the point of consumption at a predict-able price, with certainty and

redundancy of availability. “They want someone who has been in the business of owning and operating these plants, with the experience to facilitate the switch to natural gas, and who can deliver and dispense LNG safely and reliably without any disruption to operations.”

For natural gas produc-ers, the price fl uctuations of its product is nothing to worry about, according to the Bentek Energy study. “With a large amount of oil and NGLs in the production stream, producers can earn high rates of return re-gardless of gas price direction.”

Gas Movements

East Canada

West Canada

Midcon Market

Rockies

Midcon Producing

Texas

Northeast

Southeast

PacificNorthwest

Southwest UticaMarcellus

Sououthwestou

Power,Exports toMexico

Midcon Man Man Man Ma

Midcon Prodddco odMidcon Proddud

Liquids-Rich Plays

Mexico LNG Exports,Power, IndustrialDemand

WLNG Exports

X X

SOURCE: BENTEK


Original Oil in Place

McKenzie35.4 bill.

Williams28.9 bill.

Divide17.7 bill. Burke

17.0 bill.Renville0.2 bill. Bottineau

1.6 bill.

McHenry0.5 bill.

Ward5.0 bill.

Mountrail28.9 bill.

McLean3.6 bill.

Mercer0.1 bill.

Oliver0.01 bill.

Morton0.08 bill.

Grant0.06 bill.

Dunn20.1 bill.

Stark3.9 bill.

Billings4.9 bill.

GoldenValley0.09 bill.

Slope0.001 bill.

Expanding footprintin the core of the Bakken

SOURCE: CRESTWOOD MIDSTREAM PARTNERS LP

BAKKEN NEWS

To purchase an asset in the core of the core of the Bakken shale play, Crestwood Midstream Partners had to spend $750 mil-lion. The investment landed the Houston-based unconventional shale midstream developer and asset manager a major crude oil, natural gas and water gathering sys-tem located on the Fort Berthold Indian Reservation.

The system includes more than 460 miles of gathering pipe-line, which are the low pressure and fl ow pipelines that transport crude oil or natural gas from the production site (wellhead) to a cen-tral collection point. It features 150 miles of pipeline for crude oil, 160 miles for natural gas and 150 miles

for water. Bob Phillips, president and CEO of Crestwood, said the company’s main goal is to own as-sets in the core of the core of the best shale plays in the U.S.

“If you look where our assets are [in the Bakken] we truly believe we are in the core of the core,” said Will Moore, senior vice president of strategy and corporate develop-ment. Earlier this year, Crestwood merged with Inergy LP, a move that added the Colt Hub in Ep-ping, N.D., to the company’s list of Bakken assets. The Arrow facility is only 60 miles from the Colt facility. According to Moore, the company performed extensive research in the area of the CColt and Arrow facilities to better understand the

potential for future production. “I can tell you that actual [production] has outstripped every production estimate that we looked at,” Moore said.

The Colt Hub is a rail transportation facility that moves Bakken crude to the East and West Coasts. Crestwood believes it will now be able to leverage its Arrow asset to increase the value of the Colt facility, as the Arrow facility will help the company to gather more crude to ship out of the Colt Hub.

According to Phillips, the Arrow facility was engineered with exceptional quality and cur-rent additions to the location are focused on compressor stations

and pumps, not pipelines. Current work will also help to connect 234 wells to gas gathering systems, which he says will reduce fl aring in the region.

The $750 million purchase has made Crestwood one of the largest Bakken midstream service providers in the play as the compa-ny now services 18 percent of total Bakken crude production. But, for Phillips, the recent purchase is a core element of another goal for the company. “This helps us in our goal of becoming investment grade at some time in the near future,” he said.

Houston Firm Buys $750 M ‘core of the core’ Bakken Asset

THEBAKKEN.COM 13

During an October meeting on fl are reduction approaches suitable for the Bakken shale formation, Lynn Helms, director of the North Dakota Department of Mineral Resources, said the role of the Bakken in the world’s energy picture was an important point of discussion. One of the main talking points during that meeting, he said, was the reality that the Bakken is changing the

global energy landscape. The U.S. Energy Information Administra-tion has proof that the Bakken is changing the world.

In 2013, the U.S. will be the world’s top producer of petro-leum and natural gas hydrocar-bons, according to the EIA, a spot that will move the U.S. ahead of both Russia and Saudi Arabia. Credit the Bakken and Eagle Ford shales for the new ranking. Since

2008, petroleum production in the U.S. has risen by 7 quadrillion Btu, “with dramatic growth in Texas and North Dakota,” EIA said. Natural gas production has increased by 3 quadrillion Btu over the same period, but, both Russia and Saudi Arabia were only able to increase their combined hydrocarbon outputs by roughly 1 quadrillion Btu.

Although in the past fi ve

years, Russia and the U.S. pro-duced nearly equal amounts of petroleum and natural gas hydro-carbon, 2013 has been a differ-ent story. This year, the U.S. will produce 5 quadrillion Btu more than Russia.

BAKKEN NEWS

Bakken, Eagle Ford Make US World’s Top Energy Producer

A 20-year old pipeline run-ning from Tioga, N.D., to Co-lumbus, N.D., has drawn major attention following a leak that spilled more than 20,000 bar-rels of crude oil into a wheat fi eld. The pipeline, operated by Tesoro Logistics, has been temporarily shut down. Repairs are underway, crude has been contained and remediation is

underway, according to Tesoro. The remediation efforts will cost Tesoro Logistics roughly $4 million.

There is some good news in the incident. “The release hasn’t impacted any surface wa-ters, and Tesoro Logistics has been aggressive in containing crude oil,” said Kris Roberts, environmental geologist, divi-

sion of Water Quality, N.D. Department of Health. “I am very pleased with the company’s proactive response efforts.”

According to the U.S. De-partment of Transportation’s Pipeline and Hazardous Materi-als Safety Administration, the Tesoro spill equals the total for all spills in North Dakota over the past 10 years combined.

The spill is not a record breaker however, according to Roberts.

At press time, state regula-tors were still investigating the cause of the leak, but early indications show the leak was caused by corrosion. Offi cials were also determining when the leak was fi rst noticed and when Tesoro was informed of the leak.

Crude Leak Contained, Soil Being Remediated

POST A JOB TODAY


BAKKEN NEWS

When oil production levels in the Williston Basin surpass 1 million barrels per day late this year or early next, it will be in spite of the weather. Although early to midfall is typically considered a high production time due to stable weather pat-terns in the region, this year has been an exception. In August, the Williston Basin surpassed 900,000 barrels of oil per day, but during the same month, the number of well completions fell from 251 to 130. The reason: bad weather.

During his monthly Director's Cut conference call, Lynn Helms, head of the North Dakota Department of Mineral Resources, explained that he was unsure why the well completion numbers dropped

so dramatically. Thanks to a call-in from a well completion staff member of a Bakken-based fi rm, Helms was able to explain why well completions had dropped. According to Helms, the caller explained that a 2-inch rain in August had cre-ated extremely muddy condi-tions, stranding drilling rigs on well sites. The weather delayed the drilling schedule for several wells, which, in turn, delayed the completion of those wells. And, many of the delayed wells were located on multi well pads. For most operators, concerns for safety do not allow for com-pleting a well while a drilling rig is on the well pad.

In addition to August delays, October rains will also slow production in the Williston

Basin, potentially stripping 10 percent of the working days for the year. McKenzie County was forced to shut down roads due to heavy rain. The shutdowns created a similar situation the play experienced in September, with drilling rigs stranded. Only a handful of saltwater disposal transportation operations were allowed to travel the roads dur-ing the shutdown.

Although there are current-ly 450 wells awaiting completion services as of October, the pace between completing wells and drilling new wells has leveled off Helms believes. And, this fall, up to 9 drilling rigs could be coming to the Bakken.

Bakken Weather A Serious Issue

WORTH TALKING ABOUT: Record spring rains and unusual weather patterns this fall created non typical operating conditions in the Williston Basin.

THEBAKKEN.COM 15

BAKKEN NEWS

The Bakken is an equal opportunity employer. From well-head supplies to fl exible hose to aviation, the oil and gas play continues to offer an attrac-tive environment for company openings, regardless the scope or size of opening event or the company.

A two-week span in early October exemplifi es that. Canary LLC, a comprehensive oilfi eld drilling and production service, opened the largest Bakken shale wellhead facility in Watford City, N.D. The 45,000-square-foot installation, the city’s largest to date, employs skilled workers for round-the-clock access to drilling and production services. As special entertainment, former

NFL head coach Mike Ditka spoke at the opening, and David Garibaldi, a performance painter, who performed on a nationally televised talent show, painted at the event. Regional offi cials and company executives were also present.

FlexSteel Pipeline Technolo-gies Inc., a Houston-based fl ex-ible pipeline provider, also held an opening for an 8,000-square-foot facility in Killdeer, N.D., that is now housing inventory, installation equipment and tech-nical fi eld service staff members. During an opening receptions, the company invited regional operators and potential clients to see the facility and visit with FlexSteel staff.

Williston Jet Center, a joint venture company formed between Fargo Jet Center, Denver-based Ross Aviation and Overland Aviation, may not have held a large grand opening, but the company is now operating

out of Williston and is open, in part, to offer better access into and out of the region for Bakken operation teams.

Skilled Worker Openings, Supplier Launches Abound

READY TO FLY: The Williston Jet Center, at the Williston (N.D.) Airport is one of several new air services in the region.PHOTO: OVERLAND AERIAL PHOTOGRAPHY


PRODUCTS & TECHNOLOGY

Flaring is the most pressing issue and biggest challenge for regulators and operators in the Bakken shale. Flaring also presents the great-est opportunity. Roughly 1 million cubic feet of natural gas is produced per day in the Williston Basin. Of that, 70 percent is captured and sold. The remaining 30 percent is what compels regulators and industry officials to constantly craft flaring legislation, operators to install takeaway infrastructure or test new captur-ing technology, and local and national reporters to drive the region’s gravel roads photographing the tallest, brightest orange flare burning against the North Dakota skyline for a magazine cover or newspaper front page.

To date, the story on fl aring has been documented many times. Flaring in the Bakken, as the story often goes, is all about wasting a resource and an industry more focused on the bottom line than on working to reduce the amount of fl ares that light up the Williston Basin night. But, due to a better understanding of Bak-ken gas in combination with the growing use of innovative technology to move, capture or compress Bakken gas, the story has evolved and there is now strong evidence that the 30 percent is heading toward a downward trend.

Issue in a NutshellFor the North Dakota Petroleum Council, fl aring is its No. 1 priority. “There

is a tremendous amount of national attention on it,” says Ron Ness, president of the NDPC. “It is a very hard issue to educate people about, you don’t just go out there and grab that gas fl are,” he says. “There are a lot of components that go into capturing that gas fl are. With oil you can go in and get it with a truck and truck it somewhere. You can’t do that with gas.”

AWARE OF THE

FLARE

BARELY THERE:The engineered flare solution developed by Steffes Corp. reduces the amount of volatile organic compounds released into the air while reducing the color and size of the burn atop the flare stack.PHOTO: STEFFES CORP.

Evolving technologies are helping subdue the controversial process.By Luke Geiver

THEBAKKEN.COM 17


Although natural gas prices are historically low, capturing that gas still presents an economic opportunity for operators and mineral rights owners. Bakken gas is unique. In 1,000 cubic feet of raw gas, anywhere from 8 to 12 gallons of natural gas liquids including ethane, propane, butane or natural gasoline could be present. Those prod-ucts add value to the gas stream in addition to its value as a product capable of providing power or heat. Some companies have already proposed facilities to process only one of those NGLs such as butane or ethane.

But as Ness says, capturing gas is a complex process linked in large part to the presence of infrastructure. The unique qualities and value of the gas makes the notion that fl aring occurs because captur-ing is uneconomical untrue.

Justin Kringstad, director of the North Dakota Pipeline Author-ity, an agency started in 2007 by North Dakota to increase the amount of pipelines present in the state capable of moving energy-related products, also believes there is a misconception about fl ared gas in the Williston Basin. Between 2011 and 2012, the amount of pipeline installed in North Dakota could span the distance from Seattle to Washington, D.C, twice. Not all of the pipelines installed were linked to natural gas gathering lines, but according to Kringstad, there is a huge push to gather more gas regardless of the gas price.

There are two main challenges to capturing the gas produced in the Williston Basin that occurs during crude retrieval. Both are


Bakken Technologies and Efficiencies Are Reshaping the Global Shale Oil Landscape

THE FRONTIER OF NEW EFFICIENCIES

Shale Oil InnovationCONFERENCE & EXPO

February 10-12, 2014Alerus Center | Grand Forks, ND

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– Ron Ness, NDPC

WE ARE GOING TO TAKE TECHNOLOGY DEVELOPED IN THE BAKKEN AND EXPORT IT AROUND THE WORLD.

PROVEN PRODUCT: The Steffes Corp. flare unit has been tested by Continental Resources Inc. and used on nearly 1,000 well sites. PHOTO: STEFFES CORP.

THEBAKKEN.COM 19

linked to local gather-ing, having nothing to do with any large interstate pipeline. First, Kringstad says, fl aring occurs be-cause of the inability of remote well sites to be connected to a gathering line due to diffi cult to-pography or right-of-way issues. Second, fl aring occurs on well sites that are already connected to gathering lines because some pipelines are sim-ply not adequate to move the volume of gas that might be produced on a well site today versus three years ago.

“Well sites are better today,” Kringstad says, “and pipelines put in the ground a few years ago may have been undersized.” Ness points to the trend in multiwell pads as a major factor in why existing pipe-lines may be undersized. “A lot of the infrastructure was built for one


Kringstad

Ness

Cebull

Mayer


to two wells per 1,280 acre spacing unit. Now, all of a sudden, the technology has improved and we are looking at 4, 8 or 12 more wells in that 1,280.” Most gas lines are installed to handle a set volume and pressure from a set

amount of fl ares. The addition of new wells to a spacing unit creates more gas volume and more pressure. In many cases, infra-structure installed in the past isn’t equipped to handle new gas volumes. And, operators

and industry regulators are just now begin-ning to understand the fl ow rates and quali-ties of Bakken and Three Forks shale gas streams.

From the time a well begins producing crude and associated gas, an operator has one year to fl are a certain amount of gas before it is required to capture the fl are gas, unless it is determined there are circum-stances that inhibit an operator from doing so. A recent lawsuit was issued by a group of mineral owners against a group of op-erators seeking reimbursement for fl ared gas produced during and after that one-year period. In the lawsuit, the plaintiffs argue that operators are fl aring in excess during the fi rst year, and continue fl aring after the fi rst year allowance has expired. The law-yers representing the plaintiffs point out that fl aring is also taking place although in-frastructure is already in place. The status of the lawsuit is still undetermined, but it does highlight the misunderstandings that exist regarding fl aring.

“Infrastructure isn’t right-sized,” Ness says, “so that is a big challenge in and of itself. If an operator was going to get its gas as soon as it could, which everybody want-ed to do, the operator didn’t build its lines big enough. We have to look at that part of this [fl aring] puzzle.”

For both Ness and Kringstad, the an-swer to fl are reduction starts with more in-


SERVICED: The Gtuit team provides servicing and transportation for all units. PHOTO: GTUIT

COMMITTED: Mark Peterson, Gtuit chief operating officer stands near a unit on a Bakken well site. PHOTO: GTUIT

THEBAKKEN.COM 21

frastructure and compression capabilities. There are currently 18 facilities in the state capable of taking in and processing the as-sociated Bakken or Three Forks shale gas, with more on the way, including a Hess Corp. operated facility that will practically be a refi nery, Ness says. But, adding infra-structure takes time, although, since 2007, gas plant capacity has increased 340 percent from 227 million to more than 1 billion cu-bic feet per day.

The fl uctuations between the number of new wells coming online per month, versus those being connected to gathering lines is also a constant concern, Kringstad says. Those fl uctuations are stabilizing. Un-til the Bakken and Three Forks shale plays are right-sized to capture 80 to 90 percent of the fl aring instead of 70 percent, there are alternatives, however, both in the fi eld and in the boardrooms that are now reveal-ing how fl aring in the Bakken is an oppor-tunity in disguise.

Onsite AnswerThe NDPC, along with other industry

members, has formed a fl aring task force whose goal is to identify solutions for bet-ter optimization of the resource at the actual well head and fi nd ways to improve existing

infrastructure. The task force consists of government agencies, the Three Affi liated Tribes, researchers, landowners and key in-dustry partners.

Innovative technologies being used in the oilpatch are already reducing the amount of fl ared gas or cleaning up the gas that is emitted. Many of those technologies are not dependent on new pipeline installation or gas processing facilities.

Gtuit, a Billings, Mont.-based fl are solu-tions provider, is using a small-scale technol-ogy to create massive results. The company offers a mobile compression and refrigera-tion set-up that connects directly to the well-head. According to Brian Cebull, president of Gtuit, a single unit operating for one year on a well site prevents 3,856 tons of volatile organic compound emissions, 11,500 tons of C02 emissions and captures enough Btus to provide heat for 6,087 homes, numbers Cebull cites from actual testing performed in the Williston Basin. “Our solution addresses those wells that are stranded and may be per-manently stranded due to right-of-way issues or topography issues,” Cebull says.

The company currently operates 18 sys-tems. The systems strip out the NGL’s from the gas stream and refrigerate them for stor-age and transport. Units can be combined

and scaled up to handle high volumes of gas, an element of the technology Cebull emphasizes for good reason. “There are lots of folks that are coming up with new tech-nologies now,” Ness says. “The key is to fi nd some that are effective onsite. You want to be able to build scale, to be able to build mul-tiple units in the fi eld rather than a handful here or there.”

The ability of the Gtuit system to strip out the NGL’s provides operators with an attractive economic incentive. Cebull says the value of the NGL’s more than offsets the cost of service. The company designs and builds its own equipment, an aspect that wasn’t always the case. “We went into this purchasing off-the-shelf equipment and discovered quickly that off-the-shelf equip-ment was not designed for 1,500 to 1,600 Btu gas,” Cebull says. “Our basic system is actually built and rated for rich Bakken gas.”

The systems are brought to and re-moved from a well site by Cebull’s team and are serviced by Gtuit. “We are not there to compete with the pipelines. We are there to be there on day one, strip the NGLs until the pipeline shows up, then move on to the next well,” Cebull says. The company currently has contracts with the Bakken’s No. 1 lease-holder, Continental Resources.


THE VALUE: Natural gas liquids present in the gas streams are stripped out, stored and transported for use at processing facilities. PHOTO: GTUIT


Gtuit is also working with power com-panies to analyze the methane left over in the gas stream after the NGL’s are stripped out, and it has taken requests to consider using the gas to run the artifi cial lifts on the well sites. The stripped-out gas stream is also perfect for liquefi ed natural gas or compressed natu-ral gas for use in bifuel applications or diesel replacement streams.

Gtuit is expanding, Cebull says, because its clients are seeing the value in its systems. “Our goal is to be the best in the world for

treating raw wellhead gas,” he says. Cebull does have competition. Several companies, including Bakken Western Services LLC, also provides a fl are reduction technology capable of stripping out NGLs. Blaise Energy Inc. provides a technology that converts associat-ed gas into propane for use in transportation or heat. According to Ness and Kringstad, companies from around the world are com-ing to the Bakken to provide technology for fl are reduction.

Steffes Corp., a Dickinson, N.D.-based

steel fabricator that has grown signifi cantly since the Bakken shale play ramped up in 2007, has also entered the fl are gas solution industry. The company has designed an en-gineered fl are that helps to drastically reduce the amount of volatile organic compounds emitted at the well site.

Todd Mayer, new business development manager and a recognized guru of fl aring so-lutions, says the Steffes approach to fl aring is based on the extreme fl ow ranges of gas that occurs in most Bakken or Three Forks wells.


2008 2009 2010 2011 2012 2013*

Wells Connected in 2013

Wells Still Flaring

ND Wells Flaring 1000

900

800

700

600

500

400

300

200

100

0

Year the Well Began ProductionNu

mbe

r of W

ells

*Data through August 2013

SOURCE: NORTH DAKOTA PIPELINE AUTHORITY

THEBAKKEN.COM 23

In any given day, gas production can range from 1 million to zero cubic feet per day, he says. “It is well documented that wells might fl ow in the fi rst week or so at 1 million cubic feet per day and then fall quickly to one-tenth of that. You need devices that are able to handle these wide ranges of fl ow and burn effi ciently over wide ranges,” he says.

Not only does a Bakken or Three Forks well site present an operator with a wide fl ow range for gas production, it also produces two types of gas: the produced gas that is high-pressure and ready for a pipeline, and the low-pressure gas present in the oil tanks.

“Our customers wanted to know if we could design a system to be a combina-tion system, one that could take on both gas streams,” Mayer says.

The engineered fl are system Mayer and his team spent over a year designing can han-dle both gas streams, and turns that bright or-ange fl are into a thing of the past. The system features a high-pressure tip, a low-pressure tip and a pilot light. To get a cleaner burning fl are, the system relies on air mixed with the gas stream. “When you start to see smoke, we just don’t have enough air mixed in the gas,” he says.

The high-pressure fl are tip is connected to the separator that disperses the gas and oil. The high-pressure fl are tip features a stainless

steel casying on top of a 6-inch pipe. When the gas pressure builds up in the pipe after being sent over from the separator, the pres-sure raises that stainless steel casting. The gas then leaks out the crack created between the pipe head and the casting and then hugs the outside of the casting, moving vertically, not horizontally, Mayer says. “It’s like an airplane wing, it [gas] wants to hug that curved radius on that casting.” As it hugs the casting, the gas stream gathers velocity and, more impor-tantly, air.

The design accomplishes two things. The movable casting can accommodate a high range of high-pressure gas fl ows. Some-times the crack will be barely there, other times it will by one-eighth of an inch open for gas fl ow. And, because of the curved casting design that forces the gas stream upward, the resulting fl are that is produced burns cleaner and nearly translucent due to the addition of air to the gas stream. “There is no computer that is controlling it. It is weight and pressure that moves it [casting],” Mayer says.

Although the design is simple, it of-fers operators a robust option to reduce the amount of emissions created during fl aring. Since fi rst unveiling the product almost three years ago, the company has sold nearly 1,000 units. “It is much larger and more popular than we ever thought it would be,” he says.

Steffes is continually working to perfect the system. A team will train well site service teams how to install the system and most systems are checked monthly, although many don’t need a check. The units are designed for one to two well pads, but Mayer and his team are working on units that are designed for multi-well pads. “Having a larger fl are option available is crucial,” he says. For the low-pres-sure gas streams that do not create enough pressure to lift off that stainless steel casting, the company has developed a low-pressure air-assist option that includes a battery oper-ated fan to inject air into the stream, creating a cleaner burning fl are.

Mayer says his customers are happy with his system, but he is constantly working to tweak the design. Cebull is doing the same with his team on the Gtuit system, and they share a sentiment that helps to illuminate why a new chapter in the Williston Basin’s story on fl aring has begun. “We are proud,” Cebull says, “to be a part of the comprehensive so-lution to address natural gas fl aring in N.D.”

Author: Luke GeiverManaging Editor, The Bakken [email protected]


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THEBAKKEN.COM 25

Why North Dakota and Norway could become an energy superpowerBy Luke Geiver

Leveraging the Energy Culture

During the last week of September, a group of people emerged from a tour bus and scattered out along a gravel road running next to a Bakken well pad. The group had stopped to watch a hydraulic fracturing crew working at the well. Among those standing on the road were several key members of a Norwegian energy delegation sent to the region to learn about the Bakken. Like most tours of the region, the group was there to visually experience the oil patch, but during and after the trip, it became clear that the delegation would leave the Williston Basin with an understanding of the play that could make Norway and North Dakota an oil producing joint venture superpower.

An Unconventional EducationThe energy delegation represented a wide range of endeavor, including aca-

demia, industry and government. Arne Graue, the head of the Petroleum and Process Technology Research Group, professor of physics at the University of Bergen, visiting scientist at MIT and chairman of the board of the Petroleum Research School of Norway, which represents all Norway universities, headlined the academic members.

During the week-long trip that included stops in the North Dakota com-munities of Fargo, Grand Forks, Minot, Watford City and Bismarck, Graue made his presence known. Graue signed a memorandum of understanding (MOU) be-tween the Petroleum Research School of Norway and the University of North Dakota that will provide a student and professor exchange opportunity for both to learn about different aspects of how each approaches, utilizes and retrieves

INFRASTRUCTURE & CONSTRUCTION

THE DELEGATION: The energy tour included stops at well sites, frack sand terminals, workforce housing facilities, a gasification plant and several other oilpatch-related locations. PHOTO: GREAT PLAINS INSTITUTE



energy. “We are considering many of the challenges associated with oil and gas pro-duction in the Bakken fi eld in relation to the Norwegian continental shelf where we have 40 years of experience,” Graue says.

In the early 1960s, oil was discovered off the coast of Norway. Since then, the country with a population of roughly 5 mil-lion has moved into the top 10 in world oil production rankings. Norway is ranked in the top three in natural gas production, and, at roughly $800 billion, it has the world’s largest sovereign wealth fund. Norway, like every other country in the world except the U.S., treats its underground minerals and resources as property of the country, not the landowner. Although Norway's oil development mainly takes place offshore, the country has still gone through the same rapid development issues, extreme increase in regional energy production, and al-though North Dakota’s Legacy Fund pales in comparison, an incredible growth rate in country income due to oil and gas.

Even though the country does not perform hydraulic fracturing, Graue and others on the trip shared the same view on the role of the Bakken in relation to Nor-

CORE PRIVLEDGE: Steve Benson (far left), chairman of the University of North Dakota's College of Engineering & Mines Petroleum Engineering department, explains the core library located on the UND campus. PHOTO: GREAT PLAINS INSTITUTE

THEBAKKEN.COM 27


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way. “Unconventional oil and gas produc-tion is very important. We are looking for ideas that are useful in North Dakota that could be useful in Norway’s energy produc-tion,” Graue says.

Of particular interest to Graue is work being done in North Dakota to better un-derstand enhanced oil recovery and the use of CO2 to do so. “In Norway, with such a harsh environment, it turns out infrastruc-ture offshore is limited. If we don’t come up with technology to increase oil recov-ery in the next 15 years, the remaining oil does not justify the construction of any new infrastructure,” Graue says. “In North Dakota, you have the opportunity to do the right thing in order to maximize the oil re-sources. I think the approach and the most important things to do early on, from our perspective, is to focus heavily on research and development, that is what we see,” he says.

Brad Crabtree, policy director for fos-sil fuels at the Great Plains Institute, a non-profi t think tank and organization devoted to fostering better energy use in the Great Plains, also believes research and develop-ment can only help the Bakken shale play.

NEW SUBSTANCE: A popular stop on the tour was a hydraulic fracturing operation underway on a well site. In Norway, the practice is not used. PHOTO: GREAT PLAINS INSTITUTE

STANDING ON THE FUTURE: Learning about the advancements used for unconventional crude oil retrieval was one of the key goals of the energy delegation's members. PHOTO: GREAT PLAINS INSTITUTE


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Crabtree was largely responsible for making the energy delega-tion tour happen. In 2011, following Statoil’s (the Norwegian-run exploration and production giant ) acquisition of a major asset base in the Williston Basin, Crabtree began exploring the opportunity he believed was present for North Dakota and Nor-way. “Statoil’s acquisition was that company’s global effort to move into unconventionals in a big way,” he says. Now, it is an area where North Dakota and Norway can be true world leaders in the systematic deployment of new technology, he adds.

To make that happen, Crabtree made sure that after a North Dakota delegation visited Norway a year ago, that a Norwegian delegation would visit the Bakken. “Our hope and goal with this was to have people in industry, government and research talk-ing and exchanging information, but also forming real partner-ships.”

To help foster a greater relationship and continued partner-ship, Jostein Mykletum, the Consul General of Norway, a posi-tion he maintains, in part, out of Houston, was on the tour. “I’m the link between the petroleum industry and Norway,” he says. Because the state is a major player in the global energy mix, he says, Mykletum wanted to see the Bakken, including technolo-gies used related to drilling and water handling. The goal follow-ing the trip is to transfer back to his counterparts in Houston and Norway what he learned, he says. “We are here to interlink our technology with the technology here.”

THE BAKKEN IN REACH: Energy delegation members had the chance to view and touch pieces of the Bakken or Three Forks shale. PHOTO: GREAT PLAINS INSTITUTE

THEBAKKEN.COM 29


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Trip TakeawaysIn addition to the signed MOU between UND and Nor-

way, Crabtree says the tour attendees left enthused and fi red up. “They were genuinely impressed with the innovation and en-trepreneurial attitude that they saw,” Crabtree says. Most of the tour attendees were surprised to see that the oil development in the region had created less of a footprint than they had read about in media publications. All of the attendees believed the state needed to work more to address fl aring. Following a visit to Bismarck State College, the group was interested in providing Norwegian students with online classes run by BSC. North Da-kota delegates who met with the tour attendees were interested in how Norway handles its sovereign fund and what North Da-kota could do to have similar success, Mykeltum says.

Visits to workforce housing facilities, well sites, gas plants and rail loading facilities were also popular amongst the group, Crabtree says. “They wanted to experience it all. They have had that experience of oil booms so they were interested to see how we were managing the boom.”

Author: Luke GeiverManaging Editor, The Bakken [email protected]

THE REALITY: In addition to research efforts underway at North Dakota universities, the energy delegation also wanted to see firsthand the logistical issues of the Williston Basin. PHOTO: GREAT PLAINS INSTITUTE


MAKING IT

In Watford City, N.D., road construction is not frowned upon. In fact, it’s celebrated. Thanks to Knife River Corp., a construction firm subsidiary of MDU Resourc-es, the Bakken’s hub city has much to celebrate. This fall, Knife River started a bypass reroute project that will alleviate passage of nearly 3,700 trucks through the heart of the city every day. For Knife River, the bypass represents the largest road construction project the company has ever undertaken in the state. For those who have never traveled the existing road-way, imagine driving through your favorite small town in a traffic jam

of semis. The long line of traffic rumbles through the area for the majority of the day, seven days a week.

The U.S. 85 Watford City Bypass project will reroute High-way 85 traffic onto a new roadway southwest of Watford City. The overall goal is to enhance safety and traffic movement through the area, whose congestion is widely recognized as an unfortunate byproduct of oil development in the region. The completed project will span 9 miles. Knife River will build 7.5 miles of new, four-lane roadway and is also working on a 1.5 mile tie-in with existing roadway.

“We’re excited to be involved in this project for a couple of important reasons,” says Tony Spilde, senior public relations representative for Knife River. “First, it’s great to be on the team that is making Highway 85—and Watford City’s main street—safer. This is a significant step forward for safety on the Highway 85 corridor. Second, a project of this magnitude is instrumental in put-ting a lot of people to work. It’s the largest construction project Knife River has ever had in North Dakota.”

Construction began on Sept. 30 on the north end of the project. The goal, Spilde says, is

to get more than half of the mass grading done this year. The team has already moved more than 200,000 cubic yards of material, bringing the road up to grade. The team has also begun installing a box culvert and other drainage conduit.

Although Knife River has major capabilities and resources to complete the project on time, there are challenges, Spilde says. “Rain has already caused a few stoppages, but it’s still early and we’re definitely still on track,” he says. When winter does hit, the team will stop all earth work and begin hauling base rock to the project site. The plan is to

Historic ConstructionBy The Bakken magazine staff

JUST THE START: The transformation of U.S. Highway 85 and the traffic congestion in Watford City, N.D., has begun. Material is being brought in for use this winter and next spring. PHOTO: ERIC JENSEN, MDU RESOURCES

THEBAKKEN.COM 31

MAKING IT

bring in 250,000 tons of base rock in through December. Some will be placed and some will be stockpiled. As soon as possible in the spring, the team will resume grading work and bring in another 250,000 tons of base rock for the southern portion of the bypass.

Concrete paving work will take place next year on the south-ern tie-in, amounting to roughly 27,000 cubic yards of concrete. In August, mainline paving will begin and 196,000 tons of asphalt will be paved on the new route. “We expect the bypass to open by

the end of October 2014,” Spilde says.

In addition to weather battles, the Knife River team is dealing with scheduling coordi-nation. The team has to coordi-nate with eight different utility companies that need to relocate their pipelines or power lines. “These are good companies that have been great to work with, but it’s quite an undertaking to line up everyone’s schedule. We’re making good progress on that and don’t foresee any major issues,” he says.

THE PROBLEM: Oilpatch traffic has limited alternatives to U.S. Highway 85, the same highway that runs directly through Watford City, N.D.PHOTO: ERIC JENSEN, MDU RESOURCES

LINKING IT UP: Dirtwork has begun, but work is still underway to ensure the bypass will not conflict with electrical lines or underground pipe. PHOTO: ERIC JENSEN, MDU RESOURCES

TALL ISSUE: One of the main challenges to building the bypass is aligning the schedule of utilities and sewer companies that need to help Knife River Corp. move existing infrastructure to make the new roadway possible. PHOTO: ERIC JENSEN, MDU RESOURCES


IN PLAY

A new oil production yardstick has replaced the old yardstick that Lynn Westfall, director of the U.S. Energy In-formation Administra-tion, says just wasn’t useful anymore. The Drilling Productivity Report, developed by Westfall and his team over the past year, more accurately reflects current U.S. oil production during the month of the report’s release, and for roughly the two months after the release. The main driver

behind the report is the energy production linked to U.S. shale plays. “How all of this came about was the change in oil pro-duction,” Westfall says. In the past, production was measured by drilling rig counts. Because one rig would create one well at a time and that well would pro-vide a long, stable production curve, tracking production was as simple as tracking the rise or fall of drilling rigs in a given re-gion. “If rig count was going up, they knew production in a cer-tain area was going up, and if a

rig count was going down, vice versa,” he says.

But, using rig count as a production assessment tool is virtually obsolete for shale plays. “Two years ago, people started noticing that production in shale plays was going up, but rig counts were going down,” West-fall says. To help trackers more accurately understand shale production, the EIA team com-bined several metrics to form an assessment model. The metrics include new wells per drilling rig, initial production rates on new

wells, decline rates on new wells, time duration related to drilling and several other factors.

“This is very exciting, not only intellectually, but I think it is providing some very useful data to the industry,” he says. The reports focus on six major areas in the U.S., including: Bak-ken, Eagle Ford, Haynesville, Marcellus, Niobrara, and the Permian shale. The Bakken shale play production rates are known for being high the first month of production and steeply declining after that, the impact of which

Shale Production Reporting’s New EraBy The Bakken Magazine Staff

PRODUCTION FROM

NEW WELLS

86+PRODUCTION FROM

LEGACYWELLS

THOUSANDBARRELS/DAY

60THOUSANDBARRELS/DAY =26

THOUSANDBARRELS/DAY

October 2013935 Mbbl/d

November2013

961 Mbbl/d

OCTOBER-NOVEMBER

NETCHANGE

Production decreasefrom previous month

The New Equation

The EIA's new data illustrates production data from new wells and legacy wells. Adding both together provides a monthly production number. As the equation above shows, a high percentage of new well production goes toward replacing the amount of production loss that occurs in legacy wells.

THEBAKKEN.COM 33

IN PLAY

is now tracked in the EIA’s monthly production data. “One of the things that surprised us as we got into it was how many new wells you have to have just to stay even with the decline. If you looked at our data from the Bakken, for instance, and do the math, it shows that for every 100 barrels you produce from new Bakken wells, 70 barrels of that go just to replace the decline from old wells,” he says.

The numbers are not cause for alarm however. Accord-ing to Westfall, the EIA’s new data modeling shows a positive trend for many shale plays, spe-cifically the Bakken. Typically, oil production in the early life of a shale play is linked to the amount of steel in the ground, but now in the Bakken, produc-tion isn’t linked as strongly to steel in the ground. Most pro-duction increases are now a re-sult of more productive wells. As Westfall says, production is rising because operators have a better understanding of hy-draulic fracturing and horizontal drilling. “They are learning more about these new fields."

Going by the production numbers for the Bakken since 2009, Westfall is right. In Oc-tober 2009, the North Dakota Department of Mineral Re-sources reported there were 56 active drilling rigs and daily production for the month was roughly 240,000 barrels of oil per day. In October 2010, the DMR reported 154 active drill-ing rigs and a daily production of nearly 344,000 barrels of

oil. In October 2011, the active drilling rig count was 198 and daily production for the month reached 490,376 barrels of oil per day. As of October 2013, 182 drilling rigs are active and production on a daily basis for the month reached 911,496 bar-rels of oil per day. (The all-time high for drilling rigs was in May 2012, when the DMR reported 218 drilling rigs).

Overall, the main goal for the modeling is to show the combined effects of new-well production in accordance with changes in legacy production,

because, as the EIA says, total new-well production is offset by the anticipated change in legacy production. Although the mod-eling takes into accounts several factors to show a production trend in a region, it does not take into account infrastructure constraints, bad weather or shut-ins due to economic or environ-mental issues. In certain cases, the EIA also had to assemble estimations for well production due to the time delay present in some state production re-porting. North Dakota is very good about providing data in a

timely manner, he says, but other states are as much as four to six months behind with their data. “Data that is four to six months old doesn’t really do much,” he says.

The drilling production re-ports will be issued every month. The first-ever report showed that two regions in the U.S. ac-count for 75 percent of current monthly oil production growth, the Bakken and the Eagle Ford. Over the past year, the EIA re-ports, production in the regions increased by 700,000 barrels of oil per day.

2007

2008

2009

2010

2011

2012

2013

0 100 200 300 400 500 600

0 50 100 150 200 250

New-well oil production per rigBarrels/day

Rig count

SOURCE: EIA


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November 2013 - The Bakken magazine