Some industry voices believe the real story of the shale energy renaissance is not being told. To many, the story is about hydraulic fracturing, to many more it is about job creation, and to some the actual story is all about our recent ability to drill sideways through directional drilling. After reviewing the facts about water consumption as a whole by North Dakota in a report issued this month by the N.D. Water Commission, I’m fairly certain we can add another story to that list.
For all of the rhetoric and information we continually hear or read about on the topic of frack water or the oil and gas industry’s need for water, I’m not sure the entire story is ever really told or the entire context of the topic explained.
In North Dakota, circa 2012, the oil industry consumed 12,629 acre feet of surface or ground water for fracking purposes. That number accounted for 4 percent of all water consumed in 2012. Irrigation topped the list at 56 percent. According to the report, “One day of the average daily flow of the Missouri River at Bismarck (45,480 acre-feet) is enough water to frack 6,497 wells, or 87 percent of all the wells that have been fracked in North Dakota.”
The oil industry depends on water. Some operators who are tweaking frack designs to incorporate slickwater, a process requiring up to four times more water per frack, will need even more water in the future. When that happens, it will be nice to remember the full context of the story on water, fracking and North Dakota thanks to the Water Commission’s report.
On the eastern outskirts of Minot, N.D., almost directly underneath a tall blue Minot-labeled water tower, sits an unused crane capable of moving oil and gas related equipment. The crane is only there because it will soon be sent back for a larger version. The other cranes in the fleet are out in the field somewhere, most likely moving a drilling rig, a spool of coiled tubing or something else that is massive and potentially oil-related. Although the story of the three men and a crane didn’t start on the outskirts of Minot, that is where the three men (and now many more) and the crane (also now many more) has evolved.
This week I had the opportunity to tour the Rossco Crane and Rigging crane facility in Minot, and spend a morning with the founder of the company. We spoke about the evolution of the company due to the Bakken, and how it is approaching a constantly changing oil field. The talk revealed how one particular service and equipment provider views the Bakken both now and into the future, and, what operators are working towards in regards to developing their leases. Just to be totally honest, we also talked a little bit about Ross Kovach’s-the founder-time and lessons learned in Wyoming, strategies to grow a Bakken-infused business and mule deer hunts. Rick Long, general manager of the company, also provided some incredible insight into his world of reaching out to decision makers who might be in need of a drilling rig move or coiled tubing spool move.
The story about Rossco Crane would have appeared in the upcoming issue of the magazine, but sometimes it’s best to write a piece without a word or page count limitation predetermined, something I had mistakenly done before spending a morning with Kovach and crew. The three men and a crane reference was coined by Long, in an effort to explain the history of the company to new hires.
After I left the Rossco facility, I joined a few hundred other people at the Minot Area Development Corp’s annual meeting. Blu Hulsey, vice president of government and regulatory affairs for Continental Resources, gave an update on the company’s current and future aspirations, including the work Hulsey is doing in Washington regarding crude oil exports, taxes and more. The room was packed. It was clear to see everyone wants to know what the operators responsible for retrieving oil from the Bakken or Three Forks are doing now and planning for. Because of that, I’m thankful I spent the morning with a industry-related company that has to plan its own schedule, literally, on where the industry is going.
This week our team wrapped up the February issue. The magazine includes stories on the impact of high-density drilling on investors, new advancements in proppant creation technology, drilling fluid manufacturers, a Bakken legend, the potential for unmanned aerial vehicles in the Bakken oil play and as you’ll see when the issue comes out, much more. A pallet of boxes containing the issue will be delivered to the Alerus Center in Grand Forks, N.D., on Friday Feb. 7, so that every attendee of a Bakken-related event our magazine has organized in collaboration with the University of North Dakota’s College of Engineering & Mines, will be able to page through the issue while at the three-day event. Our team has written about our efforts to create an event that mimics the quality, scope and type of content that our magazine delivers each month in numerous articles and you’ve probably read about it directly from me a few times.
The event is fast-approaching, and has created a great-deal of excitement amongst our team and the sources and clients we talk with about it. I’m actually preparing for one of the main attractions of the show this week. We have put together a panel of industry experts, and by experts I mean company officials who work for large Bakken-based firms, that will talk about what they are seeing, what they have learned, what they are watching for in 2014. For the panel, I’m sitting down for an hour on the main stage with the presenters, and I’ll ask them several questions. Here are three of the questions I’ll start with:
How has the Bakken changed from 2006 to 2014?
What topics or stories related to the Bakken do you feel have gone under the radar?
What will 2014 in the Bakken bring for your company, and most importantly, why?
For more on the event, visit our agenda here, or, give me a call. I’ll do my best to point you to a specific topic of interest, there are many. And, if you have an idea for a question to ask the industry, let me know soon.
Bakken operators are well-deserving of the attention they receive from service providers, investors and media. If one wants to learn about the current state of the play, the best place to start is by focusing on the current efforts of the play’s operators. But, after a handful of visits, phone calls and sit-downs I’ve recently held with a particular type of professional, it’s clear to me that if one wants to get a glimpse into the future of the Williston Basin, geologists are the go-to source.
Two weeks ago I spent the morning with Julie LeFever, the geologist considered to be one of a handful of individuals responsible for discovering and asserting the Bakken’s potential. Her history has been told before, but I wasn’t there just to learn about her amazing past. Through the course of a few hours, I toured the Wilson M. Laird Core and Sample Library, a facility responsible for housing core samples from every well drilled in North Dakota. I certainly asked LeFever about her past, about the moments she remembers best as the Bakken went from a possibility to an oil-producing mecca. I also asked about her new areas of interest, the work that excites her now and where the future of oil production in North Dakota is headed. She spoke about all of it as we walked through the massive core library collection, looking at core boxes from several decades ago. Before I left, I chatted with some geologists in-town from Denver. Look for the story of LeFever and what she believes will happen in the future in the magazine’s upcoming issue.
Along with my encounter with LeFever, I have to admit that reading through Stephan Nordeng’s report on research he is currently undertaking to better understand the kinetics, temperatures and pressures related to petroleum production in the Williston Basin left me thinking his work was, for lack of a more specific description, cool.
His work could help other geologist find other formations in the Williston Basin that have adequate oil presence. Check out the story in this week’s newsletter to learn more. The piece links to his full report.
There are many common Bakken themes that I’ve heard about when talking to industry, and the constant presence of change in the Williston Basin is one of the most common. This week Tervita Corp. officially announced the opening of an oilfield waste landfill in McKenzie County. In September, we published a story documenting the first-ever oilfield waste landfill site to open in the Bakken. Based on the positive reaction that the landfill’s owner received from interested parties, along with interest in the story and the landfill, it was clear then that the landfill was a big deal. But, since then the Bakken has changed. More landfill operations have opened, including the Tervita facility along with a Nuverra Environmental Solutions facility, and although Tervita’s announcement is great for the industry, it also highlights how much and how fast the Bakken actually does change.
Our February issue is not themed with the topic of change, but from the stories on self-suspending proppants, investment strategies and even the story behind the making of the ultimate Bakken core library, it is clear that change will continue. I point that out as a reminder that although we may think the industry is incredibly efficient at drilling, completing wells and retrieving oil (look at the consecutive number of months in which N.D. has set oil production records), the industry will keep changing and the way it operated two years ago will be vastly different two years from now. That might be stating the obvious, but it does create an interesting question. To use the term most widely linked to eras and a period of time regarded as the best possible time or era, when will the golden age of the Bakken happen? From my perspective based on new research efforts and new findings in retrieval techniques, all combined with policy changes and new regulations set to happen, things may be good now but the golden era hasn’t even started. Beg to differ? Let me know.
Following a grain train derailment near Casselton, N.D., that caused a grain train to crash into another train moving Bakken crude, anyone involved with the Bakken-based oil and gas industry needs to pay attention to what happens next. A safety alert has been issued by the Pipeline and Hazardous Safety Administration regarding Bakken crude. The PHSA wants the general public, emergency responders, carriers and shippers to know that it believes Bakken crude is more flammable than traditional heavy crude. Research efforts are already underway to determine the accuracy of the statement.
But, regardless of what the research shows, those involved with the Bakken need to pay attention to how state and federal decision makers approach the new hot topic in the Bakken: rail safety. The state’s major policymakers and industry members have already taken major steps to address the plays past hot issues such as flaring and pipeline transport of crude oil. Now, following the incident in Casselton, there will presumably be a focus on rail safety, including: Bakken crude characteristics and how they might alter the way Bakken crude is classified, railcar requirements for moving flammable liquids, train-to-train communication protocols and more. State leaders have already taken action to speak with BNSF. The American Association of Railroads has already issued a call to retrofit or phase out railcars that transport flammable liquids to meet new, proposed standards for safety created by the AAR.
I would argue state decision makers and industry leaders have a track record of taking action to make positive changes to issues related to Bakken crude production, and now they have a new issue to address through education, clarification or potentially, new policy, protocols or requirements.
The Bakken shale play should be considered a credit enhancement tool. This month, North Dakota received the highest possible credit rating from Standard & Poor’s credit rating service. The ‘AAA’ rating the state received was based on the success of regulators and state managers to navigate and lead the state through its current economic boom. And, the rating was also based on the state’s enhanced reserves, dollars generated in large part by the development of the Bakken shale, which has given the state an incredible surplus.
Continental Resources Inc., the top leaseholder in the Bakken, can also point to the Bakken as a credit enhancement tool. The Oklahoma E&P firm was recently upgraded to investment grade by Moody’s, based in part by the company’s “attractive return on investment in the Bakken,” according to a Moody’s analyst.
The recent credit-related news comes this month during a time in which the play has been hampered by difficult operating conditions related to extreme weather. In his monthly Director’s Cut, Lynn Helms noted that December could be a difficult month for production in the region. Below-zero temperatures and constant snowfall has impacted transportation routes. But, don’t let a less productive December fool you. By mid-2014, the drilling rig count is expected to rise, once again, over the 200 rig threshold. And, with a trend in the Bakken linked to multi-well permits (look for information from the DMR’s main permitter in the January issue on this) the Bakken and Three Forks will continue a torrid drilling and new-well pace in 2014. For any company looking to solidify its financial stability based on the promise of the Bakken, the outlook for 2014 has to be a great tool to use.
I don’t know anyone in the North Dakota counties of Emmons or McIntosh, but following a press release from the North Dakota Oil and Gas Division, I would be calling them immediately. Strata-X has been granted four drilling permits, two in each county, for work on the company’s Sleeping Giant Gas Project.
First, how does a person working in or affected by the oil and gas industry not get excited by the name of the project, Sleeping Giant.
Second, if Lynn Helms, director of the Oil and Gas Division, a person with more knowledge, understanding and insight on the industry than nearly anyone (I’d love to get a note from someone who had a different person in mind), points out in the Division’s press release on the Strata-X permits that a main reason why the press release was even issued in the first place is because the wells are in such a rare area, then I’m paying attention.
Obviously, the wells need to be proven economical. A company has already tried to economically recover energy resources from the region in 2006, unsuccessfully. And, if the wells are completed successfully, it will be a long time before other similar developments will take place in the area, according to the Oil and Gas Division. But times have changed, and as the Bakken has proven, innovative technology can make last year’s impossibilities this year’s realities.
For those looking oil and gas executive spending trends heading in to 2014, check out this survey by the consultancy firm BDO USA LLP. The survey asked 100 chief financial officers their views on the energy industry in 2014. According to the survey, environmental responsibility concerns are starting to guide investments, particularly, hydraulic fracturing methods.
According to the survey, 61 percent of CFOs plan to increase their capital investments in environmentally-friendly exploration and production processes. The number this year represents a 15 percent increase over the previous year, the survey said.
“While 60 percent of CFOs similarly anticipate increasing their investment in non-conventional resources, such as shale, this suggests that U.S. energy companies have accepted that environmental stewardship must be a crucial component of their business plans,” the survey said.
Although CFO’s may be looking to environmentally-friendly products or technologies, the survey did reveal, however, that many companies may be investing in its own labor force instead. In 2014, 49 percent of the CFOs surveyed believe company labor costs will grow by 15 percent.
The labor market hasn’t caught up with the growth of the oil and gas industry yet, said Lance Froelich, senior director of compensation consulting in the global employer services group of BDO. “A very significant percentage of open positions are being filled by buying talent, and this phenomenon is driving salaries, sign-on incentives and special perquisites higher,” he added.
Is it too much to say thanks for shale energy at the dinner table tomorrow before diving into the turkey? It might be a stretch obviously, but here is some food for that thought. When you hear or read the word shale in the news, in literature or anywhere else, what are the words associated with it? As someone with an undeniably vested interest in anything that features the world shale, I can say from my experience that these words are typically used: innovation, revolution, independence, gamechanging, disruptive and without listing any more, it is safe to say that any word or phrase that hints at a positive option for U.S.-based energy supply has most likely been used.
There are most certainly negative associations made with the word shale in many cases as well. But, how can we not be thankful for a term that implies what it does, a term that is credited with creating such innovation, revolutionizing the way we think about energy production, providing the U.S. with a better sense of energy independence, and changing the game in terms of how we go about accessing and utilizing resources?
For many reading this today, I’m preaching to the shale energy choir, but I can’t think of other words in the energy space that conjure up the same positive descriptions and sensibilities as the word shale does. I don’t plan to say thanks for emissions or foreign-based energy before I eat my turkey tomorrow, but, I think I know a word that would be worth whispering a thanks too.
On the topic of shale, it is worth noting that our magazine’s event, The Bakken-Three Forks Shale Oil Innovation Conference & Expo is going to feature an incredible mix of researchers, industry professionals, experts, a U.S. Senator and others, talking about the innovation they’ve seen or encountered already in the Bakken and Three Forks plays of the Williston Basin. As a sneak peak, here is the title of an opening panel presentation at the show, “Finding The Next Innovation in the Bakken” Once you see the speakers on the panel, you’ll understand why there is no better group of individuals more qualified to speak on the subject.