COLUMN-Montana, the other Bakken: Kemp

Mon Nov 12, 2012 12:14pm EST

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By John Kemp

LONDON Nov 12 (Reuters) - The Bakken oil revolution has become synonymous with North Dakota. But the heart of most productive part of the formation is located on the far western boundary of the state and extends across the border into Montana.

In the early stages of Bakken exploration, drilling was split fairly evenly between the two states. But from about 2006 the focus shifted squarely onto North Dakota and Montana's Bakken was largely forgotten. Now there are signs of a modest revival.

Drilling equipment and crews are moving across the state line from North Dakota into the north-eastern part of the state. Twenty-two rigs were active in the state at the start of November 2012, up from just eight last year, according to oilfield services company Baker Hughes.

Montana's Department of Natural Resources and Conservation has issued a record 356 drilling permits for oil in the first ten months of this year, easily beating the previous record of 313 set in 2005, as the boom spreads across the state boundary.

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RELATED GRAPHICS

Bakken drilling activity:

Montana oil well permits:

Elm Coulee oil field:

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USGS Bakken assessment:

Montana oil and gas map:

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Despite its vast land area, Montana remains a minnow as an oil producer.

The state produced 24 million barrels in 2012 (an average of 17 barrels per well per day) just one-sixth of the 153 million barrels produced in North Dakota (64 barrels per well per day).

Production has actually declined by 30 percent over the last five years after peaking briefly at 34 million barrels in 2007.

But many of the same innovative companies that helped make North Dakota the fastest-growing oil play in the United States are also active in Montana, including Continental Resources, XTO (now owned by Exxon Mobil) and Burlington Resources (owned by Conoco Phillips).

In Richland county, right up against the border with North Dakota, the Elm Coulee field produced 10.4 million barrels of oil last year, nearly half the state total, from wells drilled into the Bakken formation.

Elm Coulee wells have been among the most productive drilled into the Bakken across the entire Williston Basin.

After an initial burst of drilling, which saw more than 500 wells sunk into Elm Coulee's Bakken between 2002 and 2007, and production surge from less than 1 million barrels in 2002 to almost 19 million in 2006, the area was comparatively quiet from 2008 to 2010 as the focus of drilling shifted to North Dakota. Output from the Elm Coulee, and Montana generally, stagnated and then fell.

But activity is picking up again.

"As people drill up their prospects in North Dakota, we'll see a few more rigs coming into Montana," Tom Richmond, the administrator of the Montana Board of Oil and Gas Conservation, predicted in an interview with the Associated Press in July.

Continental has extended drilling eight miles north and east of Elm Coulee in the hope of elongating the existing field, according to the company's most recent investor presentation.

The extension is thought to contain 130 million barrels of gross reserves in 97,000 gross acres of reservoir. Continental is testing another 157,000 gross acres with the potential to contain another 211 million barrels.

The extra drilling and exploration activity across the eastern part of the state is starting to pay off.

Montana's oil production has begun to rise again for the first time in six years, reversing the previous downtrend.

Total oil production was 5 percent (600,000 barrels) higher in the first six months of this year compared with the corresponding period in 2011, according to the Board of Oil and Gas Conservation.

As the number of number of wells continues to grow, this largely forgotten "other Bakken" is set to see more output.

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