Tight Oil Resources in North America –

An Emerging and Evolving Opportunity

Center for Strategic and International Studies (CSIS)

Tight Oil Panel Discussion

December 7, 2011

Washington, D.C.

James A. Sorensen

Energy & Environmental Research Center

Grand Forks, North Dakota

© 2011 University of North Dakota Energy & Environmental Research Center.

Pre-Bakken North Dakota Traffic Jam

Bakken Boom Traffic

What Is Tight Oil?

• “Tight” refers to the extremely low permeability of the reservoir rock, which impedes the ability of the oil in the formation to flow freely.

• Tight oil is found in rock formations associated with organically rich shale at unminable depths.

• Some produce directly from shales, but much tight oil production is from low-permeability siltstones, sandstones, and carbonates that are closely associated with oil-rich shale.

Core from Bakken Middle Member

Tight Oil – Production Technologies

• Recent advancements in technology have spurred tight oil production.

– Horizontal drilling and completion

• 5000- to 10,000-ft laterals in the Bakken

– Hydraulic fracturing

• “Fracking” with a mixture of fluids and proppants

EERC . . . The International Center for Applied Energy Technology

Hydraulic Fracturing

(a.k.a. “Fracking”)

• A mixture of water, chemicals (typically

polymers), and proppants is pumped at high

pressure into the reservoir rock formation,

forcing fractures to open along the wellbore.

• Fracking water requirements range from 1 to 5

million gallons of freshwater per well.

• A percentage of the frack water returns to the

surface, in a controlled manner, through the

casing and is recovered and disposed of or

recycled.

• Proppants in the frack fluid become stuck in

the fractures that were created in the reservoir

formation, “propping” them open.

• The reservoir rock is now more permeable,

and oil can flow more freely into the wellbore.

Where Is the Bakken?

The Bakken Formation

is a rock unit occurring

deep in the Williston

Basin.

Discovered in the

1950s in North Dakota.

Prolific, sustained

production began in the

2000s.

Oil is currently

produced from the

Bakken Formation in:

• North Dakota

• Montana

• Saskatchewan

• Manitoba

“How Many Bakkens Are There?”

Magnitude of Recoverable

Tight Oil Resources

4000 MMbo

Data on

recoverable tight

oil resources are

not yet available

for many states.

Tight Oil – Projections

EERC . . . The International Center for Applied Energy Technology

2012 Williston Basin

tight oil production

will be over 500,000

bpd.

Eagle Ford will be over

100,000 bpd.

2020 North American

tight oil production

could be over

2,000,000 bpd.

2050 North American

tight oil production

could still be over

2,000,000 bpd.

How Much Bigger Can Bakken Get?

Currently only 1%–2%

recovery factor.

Enhanced oil recovery

technologies may improve

ultimate recovery.

Can CO2 be a game

changer in the Bakken?

Tight Oil – Challenges

– Multiple-stage fracking can

require millions of gallons

of water.

– The frack fluids may

contain chemicals that

have become the subject

of public concern.

– Flaring has been a source

of environmental criticism.

Environmental Issues

Tight Oil – Solutions

– Development and application

of frack fluid recycling.

– Reformulation of frack fluids

to be more environmentally

friendly.

– Utilization of flare gas.

• Infrastructure is catching

up.

• On-site and off-site uses

for gas are developing.

Environmental Issues

Tight Oil – Challenges

Public Perception Issues

• The construction of thousands

of well pads and truck traffic for

the drilling and fracking of

thousands of wells:

– Wear and tear on roads and

highways

– Traffic jams in rural communities

– Increased airborne dust

– Adversely affect the “viewshed”

Tight Oil – Solutions

• Increased use of technologies

to drill multiple wells from a

single pad:

– Reduces the overall footprint of

drilling operations.

• Construction of truck routes

around communities.

• Development and application of

environmentally friendly dust

control materials.

Tight Oil – Economic Projections

By 2012

1450 to 2940 wells/year, with 2140 being

expected.

• 100 to 165 rigs

• This equates to 12,000 to 19,800 jobs

10- to 20-year life span for the Bakken play

• 21,250 new wells

• This equates to 3000 to 3500 long-term

jobs

Source: Mr. Lynn Helms, Director of the North Dakota Department of

Mineral Resources, from a public presentation given in Williston, ND,

on 8/3/2010.

www.dmr.nd.gov/oilgas/presentations/ActivityandProjectionsWilliston2010-08-

03.pdf

North Dakota Example

Tight Oil – Economic Impact

A single well over its lifetime is projected to:

Produce more than 575,000 barrels of oil.

Generate over $20 million net profit.

Pay approximately $4,250,000 in taxes.

Pay royalties of $6,900,000 to mineral owners.

Pay salaries and wages of $1,550,000.

Pay operating expenses of $1,900,000.

Source: Mr. Lynn Helms, Director of the North Dakota Department of Mineral Resources,

from a public presentation given in Minot, ND, on 9/1/2011.

www.dmr.nd.gov/oilgas/presentations/MinotCOC2011-09-01.pdf

North Dakota Bakken Example

National Petroleum Council Report

Prudent Development –

Realizing the Potential of North America's Abundant

Natural Gas and Oil Resources

Final Report Approved September 15, 2011

Web site where report can be downloaded:

www.npc.org

Contact Information

Energy & Environmental Research Center

University of North Dakota

15 North 23rd Street, Stop 9018

Grand Forks, North Dakota 58202-9018

World Wide Web: www.undeerc.org

Telephone No. (701) 777-5287

Fax No. (701) 777-5181

James A. Sorensen, Senior Research Manager

jsorensen@undeerc.org