COLUMN-USGS estimate for Bakken oil remains conservative: Kemp

Wed May 1, 2013 5:05am EDT

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By John Kemp

LONDON May 1 (Reuters) - The Williston Basin underneath North Dakota, Montana and South Dakota contains twice as much crude and three times more gas than previously thought, according to an updated assessment published by the U.S. Geological Survey (USGS) on Tuesday.

USGS assesses that at least 7 billion barrels of oil, and 6.4 billion cubic feet of natural gas, could ultimately be recovered from the two formations, with at least a 50 percent probability.

That is up from 3.6 billion barrels and 1.7 billion cubic feet at the time of its last assessment published in 2008.

The increases are smaller than some market participants anticipated, and remain far more conservative than estimates by some of the companies drilling in the area.

But USGS estimates are generally and deliberately conservative. Historically, the amount of oil ultimately recovered has exceeded them in many cases, as technology improves and more becomes known about remote parts of the formations. So there may be scope for even more crude and gas to be produced.

USGS made only minor revisions to its estimate of the undiscovered but technically recoverable resources (UTRR) of oil contained in the basin's Bakken formation. But it boosted its estimates for associated gas. More importantly, it thinks there is at least as much oil and gas that can be recovered from a lower layer of rocks known as the Three Forks formation that was not included in the last assessment published in 2008.

The Bakken formation is actually three layers of rock. Upper and lower layers of thick black marine shale which have a total organic content varying from 1 percent to as much as 35 percent, and a middle layer of sandstone, siltstone, mudstone and dolomite.

The upper shale layer (which is up to 58 feet thick) and the lower one (up to 56 feet thick) are thought to be the source of the oil and gas in the area. But some of the crude and gas has been expelled and has migrated into the middle layer where it forms small conventional oil and gas fields.

Large quantities also appear to have migrated downwards into the underlying Three Forks formation. Three Forks consists of several layers of tight rock and is as much as 270 feet thick in the central part of the basin.

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USGS undiscovered oil and gas assessments

2013:

2008:

Continental Resources on Three Forks:

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Three Forks' oil and gas potential has attracted increasing interest from exploration and production companies like Continental Resources, which pioneered the Bakken shale play.

Companies hope to drill down vertically through both formations, with separate laterals at each layer, maximising efficiency and oil recovery.

Continental outlined the potential in an extensive presentation to investors in September 2012, which also outlined its proposed well-spacing plan.

In its own assessment, Continental estimated that including the lower parts of the Three Forks increased the total amount of oil originally in place (OOIP) from 577 billion barrels of oil to 903 billion, and the amount that is technically recoverable from 20 billion barrels to as much as 32 billion, 36 billion or even 45 billion.

Continental is much more optimistic about the total amount of oil that could ultimately be recovered than the USGS, which is not surprising given its vested interest in the play.

But the company has already drilled a quarter of all the wells so far into the top part of the Three Forks. It has completed its first producing well into the next layer down, and is starting to test wells drilled to even greater depths into the formation.

Three Forks is a thicker and more extensive layer than the Bakken - extending further east across North Dakota, west into Montana and as far south as South Dakota. However, only 5 percent of the formation area has been tested, compared with 14-33 percent in some of the better known parts of the Bakken. As a result there is greater uncertainty about how much oil and gas it might contain and how much could ultimately be recovered.

USGS thinks there could be between 2.8 and 4.6 billion undiscovered barrels of oil ultimately recoverable from the Bakken, but its estimate for the Three Forks ranges from 1.6 billion to 6.8 billion.

For the two formations, USGS estimates for technically recoverable oil resources therefore range widely from 4.4 billion to as much as 11.4 billion barrels.

USGS employs a geology-based assessment methodology. It examines factors like the thermal maturity of the source rocks, organic content, porosity, and the geographical extent of the formations in the oil window. It then estimates technically recoverable resources by comparison with similar formations elsewhere.

More than 4,000 wells have been drilled, and roughly 450 million barrels of oil produced, since the 2008 USGS assessment. Most has come from the Bakken, which has provided more data on the region's geology, and allowed the assessors to improve their estimates for the Bakken and make a first pass at estimating recoverable resources from Three Forks.

"We agree with the range of numbers," the director of North Dakota's Department of Mineral Resources said in a press statement, "...and think the high estimate of 11 billion barrels is a reasonable target as technology and exploration of the Three Forks continues."

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