February 2014 - The Bakken magazine

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CONTENTS

FEBRUARY 2014

VOLUME 2 ISSUE 2

Pg 34 PRODUCTS & TECHNOLOGY Pg 24 EXPLORATION & PRODUCTION

Infill Drilling’s Impact on Investors

While operators institute high-density drilling programs, non-operators must tweak their participation and investment strategies to remain relevant in the Williston Basin.

BY LUKE GEIVER

THE CURRENT SCENE: As multi-well pads and multi-well drilling rigs become more prevalent, well sites will feature more artificial lits per pad.

PHOTO: RENAE MITCHELL

The Proppant Picture

Lateral lengths, discrete fracture stages and proppant volumes per fracture are all increasing. But, new advancements in the proppant industry are helping meet the increased demand.

BY THE BAKKEN MAGAZINE STAFF

Pg 40 EXPLORATION & PRODUCTION

Finding Answers Inside The Box

Julie LeFever, known for her role in discovering and explaining the potential of the Bakken formation, explains new information on the Williston Basin gleaned from core samples.

BY LUKE GEIVER

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CONTENTS

FEBRUARY 2014

VOLUME 2 ISSUE 2

Pg 48 CONSTRUCTION & INFRASTRUCTURE

Help Wanted

Staffing firms are receiving an adequate amount of applicant interest for Bakken-based jobs. Now, the emphasis is on matching client need with a qualified candidate.

BY KEITH LORIA

Pg 56 PRODUCTS & TECHNOLOGY

Field-Tested Fluid Advancements

An oil-industry veteran has brought the Bakken a new suite of fluids combined with a unique dispersal method designed specifically for the long laterals consistent in the play.

BY LUKE GEIVER

DEPARTMENTS

Q&A

62 Following a Trail Blazed By Lewis and Clark

The Port of Vancouver’s Curtis Schuck explains the plan to move Bakken-crude to the West Coast

BY TIM PORTZ

IN PLAY

64 The Collaborative Energy Complex: Research and Industry Partnerships

The University of North Dakota’s proposed facility will be a privately funded dream facility for the oil and gas industry and the school’s leading researchers.

BY THE BAKKEN MAGAZINE STAFF

6 Editor’s Note

Realizing the Bakken's Potential

BY LUKE GEIVER

10 ND Petroleum Council Listen, Develop, Respect

BY TESSA SANDSTROM

CONTRIBUTION

66 Leveraging The Bakken's Highground Unmanned aircraft vehicle's in the Bakken

BY MO KHAN

14 Bakken News

Bakken News and Trends

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EDITOR'S NOTE

Realizing the Bakken’s Potential Luke Geiver

Editor The Bakken magazine lgeiver@bbiinternational.com

Infill drilling has ushered in a new phase of development in the Bakken and Three Forks shale plays. Many operators are executing high-density drilling programs that put multiple wells on a single pad and more wells in a single spacing unit. The strategy is directly related to the likelihood that most operators have secured their leasing rights, and held their acres by production, allowing them to focus on a complex strategy to maximize production. The infill strategy allows operators to add more wells or pads to previously drilled spacing units in producing or proven areas. Of the 2,000 permit requests received by the North Dakota Department of Mineral Resources for 2014, 403 of them are for four-well pads and another 202 are for seven-well pads. The pattern is clear: The move to maximize production in already leased and proven acreage is changing the dynamics of development in the play––including for investors.

To highlight how these drilling programs are impacting investment strategies and stakeholders’ levels of participation in the Williston Basin, in this issue, we chronicle the formation of Mainstream Investors LLC, a Minot, N.D.-based investor group that plans to take advantage of the evolution to high-density drilling in Bakken and Three Forks wells. Comprised of an all-star cast of oilfield veterans, the group has developed a solid investment plan that says infill drilling is here.

Although production continues at a record-breaking pace and the North Dakota portion of the Williston Basin approaches 1 million barrels of oil per day, operators are still not set in their ways of retrieving oil.

Santrol Inc. is on the verge of launching a self-suspending proppant product that the company believes will be a great addition to the product suite utilized by completion designers. The Texas-based proppant giant is already working with some Bakken operators.

Jerry Noles and his team from Coil Chem LLC are also a prime example of the constant quest by operators to reach greater efficiencies and production levels. Through the use of the company’s fluid products and dispersal system, Noles’ team has been able to help drilling teams reach total depth records and remove fracture stage plugs inhibiting a well’s full production potential all because of the company’s focus on offering products specifically designed for the long laterals associated with the Bakken. As Noles’ said, “If you are going to be the best, you better test your products in the Bakken.”

Julie LeFever, director of the Wilson M. Laird Core and Sample Library, has probably forgotten more about the Bakken than many of us will ever know. The Bakken magazine spent a morning with her, touring her core and sample library and getting her perspective on the long-term future of oil production in North Dakota, an outlook that has LeFever more optimistic than ever.

Optimism about the long-term potential of the Williston Basin is also expressed by Curtis Schuck of the Port of Vancouver. In a Q&A on page 64, he tells of the positive impact the POV and the surrounding West Coast community will receive from the movement of midcontinent crude to the coast.

Hesham El-Rewini, dean of the UND College of Engineering & Mines, is working through combined efforts to bring the oil industry together with petroleum researchers at a proposed state-of-the-art facility at UND. The facility will help the industry develop technology, strategies and, most importantly, talented employees for the industry’s future, which El-Rewini says has unlimited potential.

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The BAKKEN MAGAZINE FEBRUARY 2014

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Montana Energy 2014

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12-13, 60

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 service@bbiinternational.com.

Advertising The Bakken magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about The Bakken magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational.com. 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 lgeiver@bbiinternational.com.

COPYRIGHT © 2014

by BBI International TM

Please recycle this magazine and remove inserts or samples before recycling

MBI Energy Services

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National Oilwell Varco

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North Dakota Guaranty & Title Co.

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NORTH DAKOTA PETROLEUM COUNCIL

THE MESSAGE

Listen First, Develop Partnerships, Respect Others

By Tessa Sandstrom

These are the guiding principles of the North Dakota Petroleum Council’s North Dakota Oil Can! program, and through events and programs like the Bakken Rocks CookFest and Pick Up the Patch, we have worked hard to adhere to those principles. These programs– among others operated through North Dakota Oil Can!–offer many opportunities for us to engage the public and give them an opportunity to learn from the industry. Education, however, must go both ways, and one way we try to learn from North Dakotans is through a public perception survey we conduct annually.

This year marks the third year that the NDPC has commissioned the survey to learn what the general perception is of the oil and gas industry and to also learn what the top concerns are. Each year, the survey has given us similar results–the industry is widely supported for the positive impacts it has had on our state’s economy, employment, and role in reducing our dependence on foreign energy. In fact, 83 percent of North Dakotans favor oil and gas development, half of whom strongly favor it.

But as in many cases, there is always room for improvement, and it is no secret that these 10

benefits have also come with some challenges. As in past years, housing, traffic, safety, and roads and infrastructure continue to be among the top concerns of North Dakotans, both within the oil and gas producing counties and throughout the state, and most agree that more dollars need to be targeted to these impacts. The industry has been working hard to address many of these issues, whether it is through building

The BAKKEN MAGAZINE FEBRUARY 2014

the pipeline infrastructure we need to get trucks off our roads, giving contributions to local emergency responders or advocating that more of the tax revenues generated in western North Dakota be returned to these impacted communities. We look forward to continuing these efforts in 2014.

North Dakota has seen significant changes over the past five years, becoming a younger and more diversified

state. Statewide, 73 percent of North Dakotans agree that this and the economic benefits of oil development are good things outweighing risks. Regularly, there is news about a new restaurant opening in Williston, or new affordable housing going up in Watford City, N.D. These are all things that will improve the quality of life for many–and are all greatly needed.

These investments are fueled by the positive

NORTH DAKOTA PETROLEUM COUNCIL

business climate and certainly that surrounds oil and gas development, and the employees and young families it brings with it. With past boom and bust cycles, many investors were leery of building in North Dakota, but today, that situation is much changed. The oil and gas industry has become a strong

part of our economy, generating billions in tax revenues that fund our roads and schools. With that has come certainty: certainty that the industry is here to stay and so are its employees and families to live in the homes being built and to work in and buy from the businesses opening up.

Some have disagreed with

the pace of development and have asked for a slowdown.

Yet, this sentiment brings with it a sense of uncertainty. The Dickinson Press editor perhaps said it best: “Free enterprise, infrastructure and the real estate markets are all catching up in the Oil Patch. Why slow down just when things are beginning to

balance out and life is beginning to stabilize?”

Yes, there are impacts and risks–impacts and risks that are better addressed by investments in better safety protocols, better pipelines and more infrastructure. It is not beneficial, however, to remove the certainty of oil development that may cause developers to rethink those much needed investments in homes, businesses, hotels and other amenities. When 83 percent of North Dakotans believe that the pace of development should stay the same or increase, we cannot afford to have developers back out of these important investments. We cannot afford to have families continue living in campers while they wait for homes to be built, or administrators uncertain about getting enough teachers for their growing schools because they cannot get investors to build affordable housing.

But lastly, we cannot afford to slow down the industry’s contributions to state coffers when investments must be made in our roads, hospitals, schools, and essential services. Whether we live in the east or west, these are concerns and investments, as shown by our survey, that we can all agree on.

Author: Tessa Sandstrom Communications Manager, North Dakota Petroleum Council tsandstrom@ndoil.org 701-557-7744

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EPA APPROVED

The Issue Are you ready for the April 2014 deadline for the new EPA regulation and compliance requirements?

EPA’S AIR RULES FOR THE OIL & NATURAL GAS INDUSTRY Storage tanks used in oil or natural gas production are subject to EPA’s 2012 New Source Performance Standards (NSPS) for VOCs if they have the potential to emit six or more tons of VOCs a year. This legislation (40 CFR 60 Subpart 0000, “Quad 0”) also affects existing tank batteries built from August 2011 to present. Tanks that come online after the most recent proposal is published in the Federal Register will have to have controls (a combustor or vapor recovery unit), to reduce VOC emissions by 95 percent in place by April 15, 2014 or within 60 days after startup, whichever is later.

Get ready now and contact NOV Mission today:

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The BAKKEN MAGAZINE FEBRUARY 2014

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BAKKEN NEWS

BAKKEN NEWS & TRENDS

Numbers Hint At Future Production As oil production in North Dakota approaches 1 million barrels per day, there are no signs of a production slowdown. As of November, the state reached 973,045 bopd and surpassed 10,000 wells, both record setting numbers. Along with the record breaking numbers in November, the N.D. Department of Mineral Resources also highlighted the potential for natural gas production not present in the state for the past several months.

Due to a recent decrease in natural gas storage and the potential rise in natural gas prices, the DMR noted that shallow gas production in the state may now be economical.

Numbers submitted to a Government Finance Interim Committee in December, also indicate that drilling new wells in the Williston Basin continues to be an economic no-brainer. This year, the DMR has already approved 1,552 permits to drill with another 736 pending approval. And for 2015-'19, the DMR has already approved orders for 1,012 permits that will create 5,247 wells.

Drilling Permit Breakdown:

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The BAKKEN MAGAZINE FEBRUARY 2014

2014 Drilling

BAKKEN NEWS

2015-2019 Drilling 267 orders for approximately 2,000 increased density wells pending approval 3 orders for 18 wells / 1280 acres 1 order for 17 wells / 640 acres 2 orders for 16 wells / 1280 acres 1 order for 15 wells / 1280 acres 40 orders for 14 wells / 1280 acres 1 order for 13 wells / 1280 acres 10 orders for 12 wells / 1280 acres 3 orders for 11 wells / 1280 acres 21 orders for 10 wells / 1280 acres 4 orders for 9 wells / 1280 acres 147 orders for 8 wells / 1280 acres 202 orders for 7 wells / 1280 acres 97 orders for 6 wells / 1280 acres 77 orders for 5 wells / 1280 acres 403 orders for 4 wells / 1280 acres

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BAKKEN NEWS

Coming Soon: Railcar Design , Track Changes The practice of shipping Bakken crude by rail may soon change. The derailment of a grain train and the collision with a crude oil train near Casselton, N.D., that followed, has brought national attention to the transportation method responsible for moving roughly 70 percent of oil produced in the Williston Basin to refineries outside of the region. The changes

could impact the specifications for railcars used to transport crude, the safety protocols implemented by rail operators, classifications for Bakken crude and the near-term, time-based efficiencies related to the current process of Bakken crude-by-rail methods.

Several parties will play a role in the future of the transportation method, including the U.S. Department of Transportation, the Pipeline and Hazardous Ma-

TRANSPORT TIMELINE: Actions taken by PHMSA and FRA on the safe transport of flammable liquids.

Note: Dates and Information according to the PHMSA

January 2014

Secretary Foxx contacted rail company CEOs and rail and energy association leadership to issue a Call to Action and discuss how to maintain our safety record even as domestic crude oil production and movement has increased.

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The BAKKEN MAGAZINE FEBRUARY 2014

terials Safety Administration, the Federal Railroad Administration, oil industry representatives, railroad representatives and state and local government officials. The PHMSA recently closed a comment period on the proposed rulemaking it started forming two years ago. The proposed rules would improve safety

January 2, 2014

PHMSA issued a safety alert to notify the general public, emergency responders and shippers and carriers that recent derailments and resulting fires indicate that the type of crude oil being transported from the Bakken region may be more flammable than traditional heavy crude oil.

of railroad tank car transportation. The proposed rules drew comments from the American Petroleum Institute and Hess Corp., among many others. The American Association of Railroads had also proposed a number of tank car updates or requirements through P-1577, a petition for new standards created by the AAR tank car committee that the PHMSA has also been considering.

The proposed

December 5, 2013

PHMSA closed the comment period for its Advanced Notice of Proposed Rulemaking that sought petitions and recommendations to improve the safety of railroad tank car transportation.

BAKKEN NEWS

rules could potentially alter tank car design and rail carrier operations. Tank car designs could include thermal protection to address breaches attributable to exposure from fire conditions; roll-over protection to prevent damage to top and bottom fittings; hinged and bolted manways that would stop a common cause of leakage during accidents; and, bottom outlet valve elimination. Rail car operations could be changed through rail integrity improvements on

broken rails, track geometry and other elements to reduce the car August 29, 2013 volume and severity of derailThe Department of Transportation announced that ments; alternative brake signal FRA and PHMSA had launched Operation systems to reduce number Classification, a joint inspection operation in North of cars and energy linked to Dakota’s Bakken oil region to verify that crude oil is being properly classified in accordance with derailments; speed restricfederal regulations. This includes activities such tions for trains with 20 as unannounced spot inspections, data collection or more loaded tank and sampling at strategic terminal and cars and emergency transloading locations that service crude oil. response changes.

The proposed rules August 29, 2013 September 6, 2013 Administrator were not PHMSA published an Advance Notice of Quarterman and Administrator expected for Proposed Rulemaking that posed a number of questions to solicit comments from stakeholders as well as data related to the cost implications of implementing a rule requiring comprehensive improvements to rail safety of flammable liquids.

|article continued on page 14

November 20, 2013

PHMSA and FRA issued a safety advisory reinforcing the importance of proper characterization, classification, and selection of a packing group for Class 3 materials, and the corresponding requirements in the Federal hazardous materials regulations for safety and security planning.

Fall 2013

FRA Administrator Szabo sends a letter to railroad industry organization asking they detail actions they’ve taken in response to the Emergency Order issued Aug. 2.

November 6, 2013

PHMSA extends the ANPRM comment period to Dec. 5.

Szabo address the Railroad Safety Advisory Committee, a technical and policy stakeholder body that makes recommendations to the FRA on pending and future regulatory issues, during an emergency session.

August 27-28, 2013

FRA and PHMSA to receive public input on improving the safe transport of hazardous materials by rail, including a discussion on enhanced design specifications for the “DOT 111” tank cars commonly used to transport petroleum crude oil and ethanol.

THEBAKKEN.COM

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BAKKEN NEWS

|article continued from page 13

representatives, met with Anthony construction of new rail tanker many months, but following the Foxx, secretary for the DOT, cars wouldn’t be finalized until Casselton derailment incident and Cynthia Quarterman, head of the January 2015. the work of the oil industry and PHMSA, and Joesph Szabo, head The delegation, including both North Dakota senators, the other government officials, rail and of the Federal Railroad Adminrules will be issued much sooner. istration. Following the meeting, oil indusSen. John Hoeven, R-N.D., and the delegation agreed to take Sen. Heidi Heitkamp, D-N.D., met try specific actions within 30 with BNSF, the railway operator days of the meeting. that owned the portion of rail “I am where the derailment took encouraged the place. The senators also oil and rail inmet with officials from December 2012 dustries and the U.S. DOT and FRA begins Bakken Rail government PHMSA after the Accident Mitigation Project (RAMP), which includes officials are DOT indicated conducting additional working rules governJuly 29, 2013 hazardous materials safety together ing the In a letter to the American inspections, increasing efforts Petroleum Institute, DOT to find a to reduce highway-rail grade

August 2, 2013

informed the industry that the FRA will utilize PHSMA’s test sampling program to ensure that crude oil is being properly tested and classified for shipment in HMR authorized tank cars.

crossing trespass accidents, and facilitating hazardous materials safety training seminars with shippers, consignees, contractors, and sub-contractors.

In the wake of the July 6 derailment of a train carrying crude oil in Lac-Mégantic, Canada, the FRA issued Emergency Order No. 28, requiring the railroads to properly secure rolling equipment. FRA also published a Safety Advisory recommending railroads take additional action to eliminate risk throughout the rail network.

September 2012

PHMSA Administrator Quarterman visits North Dakota Bakken region to observe operations at rail loading facilities and the application of U.S. DOT regulations.

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The BAKKEN MAGAZINE FEBRUARY 2014

solutions which will restore public confidence in rail transportation and provide better safety to our citizens,” said Rep. Kevin Cramer (R-N.D.).

The North Dakota Petroleum Council was also pleased with the news from the meeting that safety standards would be issued sooner than later. “The PHMSA has sat on the enhanced safety standards for more than two years,” said Ron Ness, president of the NDPC in a statement. “We are pleased to find out these standards may finally be closer to being released so manufacturers can begin production of better, more secure rail cars.”

BAKKEN NEWS

QEP Resources Invests $1M in Affordable Housing Units QEP Resources Inc. invested $800 million in 2013 in its oil production related operations. In December, the exploration and production firm added another $1 million to its list of investments in the Williston Basin, contributing the money to the Housing Incentive Fund to help create affordable housing units in western N.D. “QEP Resources is excited and thankful for the opportunity to contribute $1 million to support the state’s affordable housing development program,” Matt Thompson,

vice president of the company’s Northern Region said. “As we safely and responsibly develop North Dakota’s natural resources, we are committed to supporting the growth and development of the state’s local communities through programs like the Housing Incentive Fund. We look forward to continued investment in the state for years to come.”

The contribution will be used to develop Arrowhead Estate in Arnegard and the second phase of a Williston State College Founda-

tion development. Both projects will be used to house essential service workers, according to the N.D. Industrial Commission. The N.D. Housing Finance Agency, which is responsible for administering the money, has received 448 contributions. The greatest financial support for the housing fund has come from financial institutions.

Gate City Bank and U.S. Bank each provided $3 million, while Bell State Bank & Trust along with Wells Fargo Bank contributed $1 million apiece. Companies participating in

the Housing Incentive Fund effort receive a tax credit against their state income tax liability equal to their contribution.

Tesoro Corp. also contributed to the HIF fund last year donating $500,000 to support housing in western N.D. Tesoro’s donation will be used in the N.D. communities of Bismarck, Mandan, Dickinson, Watford City and Williston.

2013 Energy, Transportation Permits Push NDPSC Past $1B The North Dakota Public Service Commission, the state agency tasked with permitting siting and regulating activities related to electric and gas utilities, telecommunications companies, power plants, electric transmission lines, pipelines, railroads, grain elevators, auctioneers, commercial weighing devices, pipeline safety and coal

mine reclamation, had a billion-dollar 2013. The PSC approved siting applications for energy-related projects that exceeded $1 billion. The projects included eight pipelines totaling 100 miles, 90 megawatts of gas-fired generation, several route changes for transmission lines and three wind farms with 560 megawatts of total generating capacity.

Although some of the projects were started in 2011 and not given final approval until 2013, the PSC said the average processing time once applications are complete is roughly 60 days. Commissioner Julie Fedorchak called 2013 a brisk year that brought “steady and orderly progress on the development of infrastructure to

server the state’s growing energy industry.”

Randy Christmann, another commissioner for the PSC, said the infrastructure development will give the state long-term economic strength and make the state safer.

THEBAKKEN.COM

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BAKKEN NEWS

Schlumberger, Partner Complete Largest Bakken Monitoring Effort Two of the Bakken’s biggest name companies have teamed up on the industry’s largest downhole microseismic monitoring operation ever, according to Schlumberger, the global energy services provider.

The company provided a brief summary of its work with Continental Resources in its fourth quarter earnings update. Schlumberger worked with Continental Resources on the project.

Deploying a combination of monitoring tools and techniques to acquire downhole data related to hydraulic fracturing growth and optimum well spacing in three of Continental’s Bakken and Three Forks wells.

Schlumberger used three wireline versatile seismic imager receiver arrays in combination with its trademarked TuffTRAC cased hole services technology.

The versatile seismic imag-

20

ing was able to acquire data more than 3,000 feet from the location of the microseismic events, the company said. The operation was completed in 63 days and included 293 fracturing stages, in which the wireline monitoring services gathered information on over 300,000 lateral feet.

The TuffTRAC technology allows Schlumberger to acquire downhole data in cased wells using a wireline deployment system instead of housing the monitoring instrumentation on drill pipe or coiled tubing. The TuffTRAC technology utilizes electromechanically driven wheels that are deployed from the downhole tool’s main body.

The wheels are able to move the tool down and through the wellbore in vertical and horizontal sections. Radial arms connected to the wheels are extended from

The BAKKEN MAGAZINE FEBRUARY 2014

THE TuffTRAC: Schlumberger's downhole monitoring and data acquisition technology uses deployable wheels that contact the well casing to move the system into and out of the well.

PHOTO: SCHLUMBERGER

the main body, and if the wheels begin to slip on the surface of the casing resulting in traction loss, the TuffTRAC system can increase the radial arm tension to decrease the amount of wheel slippage. The system can also move forward and backwards.

BAKKEN NEWS

TRUCK OPTION: The goal of Savage was always to bundle its services, including train, transloading and trucking for all needs in the Bakken.

PHOTO: SAVAGE

Savage Creates Service Bundle At Transloading Site The bundle-based vision of Savage, a national logistics and service provider to the oil and gas industry, is now becoming very clear. Earlier this year, the company opened a transloading facility near Trenton, N.D., to supply the Bakken with drilling pipe and pipe services. Erik Skoy, vice president of oil and gas for the company said that bundling

services allows a company to be unique from other similar companies. Savage has now increased its Trenton transloading service abilities by offering crude-by-truck capabilities.

The Trenton facility can now handle crude brought to the site via truck before shipping the crude on the BNSF mainline. The terminal provides truck dispatch

FULLY CONNECTED: The Trenton, N.D., facility is connected to the BNSF mainline and can move 100,000 bopd.

PHOTO: SAVAGE

and transportation, unit train loading, single car transloading and car storage for crude-byrail shippers. The company has the ability to truck more than 10,000 barrels of oil per day. This month, the company will also add another 10,000 bopd capacity to its truck fleet. The terminal can move 100,000 bopd and the track capacity at the site can accom-

modate up to two unit trains simultaneously. There is storage for more than 50 rail cars. Currently, the facility has six crude receiving truck bays and 290,000 barrels of tankage. Expansions are already underway for increased tank storage, truck receiving ability and outbound unit train loading abilities, according to Savage.

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The BAKKEN MAGAZINE FEBRUARY 2014

EXPLORATION & PRODUCTION

INFILL DRILLING’S IMPACT ON INVESTORS High-density drilling puts more wells on a single pad. For investors, that’s good and bad.

For Mainstream Investors LLC, it’s a great thing.

By Luke Geiver

Investing in the Bakken’s oil and gas industry is never guaranteed, even if you are Mark Anderson. In 2012, he became the presi-

RETURN ON INVESTMENT: Mainstream Investors started with only a handful of leases that featured only one well.

Today, the company has roughly 16 wells in various stages of production.

dent of Minot, N.D.-based Mainstream Investors LLC after a 20-year career in the financial services industry. The company was founded by a $2 million investment from Bob Mau, a recent inductee into the North Dakota Petroleum Council’s Hall of Fame and the president of MW Industries. “He recognized the opportunity to create a company that would provide North Dakotans access to the Bakken,” Anderson says. “We wanted to provide a vehicle for people to participate in what is going on.”

Anderson was able to assemble a cast of oilfield veterans onto a board of governors to help formulate and guide Mainstream’s investment choices.

PHOTO: MAINSTREAM INVESTORS LLC

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EXPLORATION & PRODUCTION

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'The advantage for any leaseholder is that you buy the leasehold once and then you get to participate in multiple wells.

The disadvantage would be the capital required to do so.'

Mark Andersen President of Minot, N.D.-based Mainstream Investors LLC

for safety and environment 26

The BAKKEN MAGAZINE FEBRUARY 2014

“The caliber of the individuals that are involved with our team is amazing,� he says.

Team members include geologists, well service providers and petroleum engineers. The company recently raised another $10 million, all of which will go towards Bakken or Three Forks wells. But, even with an all-star cast, a background in finance and an oil well investment focus that features a near guarantee—Bakken wells are successful more than 95 percent of the time—Anderson and his investment team must find a way to succeed in a changing era of development in the Williston Basin. Efficiency gains associated with drilling rigs, the practice of multi-well pad construction and the movement by many operators to begin or continue infill drilling programs means investors of all kinds have to face a new reality not present in the Bakken circa 2006.

Investors involved with single spacing units from 2006 to 2009 most likely required capital for only one well. Today, as operators

In the harsh world of oilfield operation, IT’S SURVIVAL OF THE FITTEST.

practice infill drilling, a single spacing unit could feature 16 wells.

“The high density drilling has really been a game changer for investors,” Anderson says.

How Infill Drilling Impacts Investment Mainstream purchases leasehold interests for working interests in producing wells and spacing units, which means the Minotcompany participates as a non-operator. The company participates in the expense side of the well and pay’s its portion of the costs required to bring the well on production, an act that means Mainstream also gets to participate in the revenue created from that production. The advantage to purchasing leaseholds is that once an investor participates in a given spacing unit, that investor gets to participate in all future wells on that unit. On an individual basis, well costs in the Williston Basin can range from $7 million to $12 million.

In early 2013, Mainstream bought its first leaseholds in the Williston Basin. At the time, only one of the leases had a well spudded. Anderson’s team now has 16 wells authorized for drilling, 11 of which have been permitted and are in various stages in the production startup process. The company is working with three different operators, Emerald Oil Inc., Kodiak Oil & Gas and Hess Corp. “The small exposure has blossomed from a single well on a

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EXPLORATION & PRODUCTION

Mainstream Members

Mark Andersen, financial service veteran

John Broschat, Petroleum Engineer

Daryl Andersen, Owner of Hams Well Service Inc.

Mike and Stacy Sweeney, oilfield services company founders

single lease to 16 wells and more to come,” Anderson says.

The escalation of the investment company’s wells and well costs is not something that all investors can manage. Smaller investors that were once looking to participate on a smaller level or a single well are finding it difficult to continue participat-

ing in the leases that they own, Anderson says, because of the volume of wells that are being drilled on a single spacing unit.

“The costs that they are obligated to pay to participate are now multiplied by 4, 8, 12 or 16. It is very capital intensive today.”

Past drilling programs may have only contained a single well.

The single wells were planned to help operators secure their lease acres and hold the acres by production, a process that keeps the acres under contract for the life of the producing wells on the acres.

Infill drilling has created a new trend amongst investors: consolidation. Anderson and his

team will buy smaller lease hold interests from investors who are unable to participate financially in new wells, he says. “We pool investor capital together.

We have several investors with a larger capital base to work with.

We can take advantage of larger deals.”

Anderson is specifically in

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the market for applications for expenditures (AFEs). The AFEs are letters sent to leaseholders from an operator that verify an operator has filed and received permission to drill on a particular spacing unit. The letter indicates what the operator anticipates for the cost of drilling and completing the wells. The letter allows the leaseholder to opt in and pay for part of the production costs. If leasehold owners don’t have the capital to participate, they sell their leasehold interests. “We buy AFEs. We are buying the working interest and it already has a drilling program associated with it,” he says.

The practice of infill drilling presents a two-sided coin, Andersen adds. “The advantage for any leaseholder is that you

buy the leasehold once and then you get to participate in multiple wells. The disadvantage would be the capital required to do so.”

Mainstreaming the Investment Process To determine which leaseholds and AFEs are worth pursuing, Anderson reviews several elements of the Bakken and Three Forks production process, including: new permitting activity, production reports, decline curves and even the price operators are getting for oil sold.

That process is possible to perform by almost any investor.

For an additional step, the team relies on its internal knowledge and understanding of the industry.

Samantha Roberts, a ge-

ologist from Roberts Geology Services, is one of the team members with extensive industry experience applicable to the investment process used

by Mainstream. After graduating from the University of North Dakota, Roberts moved to Arizona to pursue a job in her field. Two years after moving to Arizona, she landed her first job in the environmental inspection field, a job she says would not have happened in the slow oilfield job market of North Dakota. Today she is a well-site geologist, or geosteerer, responsible for drilling horizontal wells mainly in the Bakken formation for one of the largest leasehold operators in the play.

Roberts was contacted by Anderson after moving back to

North Dakota, and now spends part of her week working on investment research and information for Mainstream. She has worked on several wells and formed a valuable knowledge base about trends in drilling. Although Roberts believes drilling a well is not a precise science, she does say a geologist guiding a drilling rig operator has to know how to make quick decisions. Geology can change 100 feet from where the geologist thought it had a handle of the well, she says. “I’ve yet to find one that I can say is easy.”

When Roberts first started in the Williston Basin, the goal was to drill a well without putting it into the shale, doing so would cost the operator money to sidetrack the well and build

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The BAKKEN MAGAZINE FEBRUARY 2014

a trough to reroute the well out of the shale that could take 18 hours to go 30 feet. “Now the target zones are only 8 foot zones, they aren’t based on porosity, they are just based on drilling and steering at targets,” she says. Three years ago, building the curve took roughly three days and today it takes only 12 hours. The time to drill a well has also decreased, she adds, going from 24 days to 15 days in a three-year period. With walking rigs, Roberts and her team can drill four to six wells in the time it used to take to drill two.

On the completion side of the process, Roberts is seeing more operators putting cement into the liner on the lateral portion of the well. “If you do that you have to minimize dog legs. You can’t climb five feet in 100 feet because you would put too much severity in there. It would be too hard to put the liners in,” she says. Drilling wells purposely for completion strategies is becoming more integrated than ever before, but every operator still goes about oil production differently. Some operators will drill an entire well start to finish with one size pipe while others will drill all of the curves with a 5-inch pipe and then come back to do the laterals with 4-inch pipe.

Insight on drilling trends and the drilling order for a series of planned wells in a particular spacing unit is a major asset to the Mainstream team, Anderson says.

And, it’s not just Roberts who supplies the group with useful perspective.

Michael Sweeney, founder of two oilfield services companies acquired by Waste Management in 2013, has also joined the Mainstream team. For both Andersen and Sweeney, it was a perfect match. “Before joining Mainstream, I didn’t know where I should invest or how to get involved in the Bakken as a private investor,” he says.

“Even being in the business, it is a daunting task. There is just so much to the oil and exploration business.”

Sweeney previously owned Summit Energy Services, a full-service roustabout company that helped in building well pads,

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DEVELOPMENT IN PROGRESS: The Mainstream Investor team has seen major development on or around its leased acres in the Williston Basin since it formed in 2009.

PHOTO: MAINSTREAM INVESTORS LLC

roads and tank batteries. He also owned Liquid Logistics, a water transport and handling company. “It was an exciting time, we had five different offers for the businesses.

Waste Management had the best,” he says.

Since joining Mainstream, Sweeney has learned the complexities of the AFEs. “You could buy into an AFE, then a year later the operator went and got permission for four more wells on the same site. They come back to the investor and ask if the investor wants to be involved, and if the

32

answer is yes, they have to invest four times as much as they previously thought.”

Most non-institutional investors can’t keep up with that pace, he says. One of the main aspects of Mainstream that Sweeney is interested in is a plan to gain a larger investor base. The idea was to start with a group of high-dollar investors to gain more access to the Bakken, “and then open up subsequent investment opportunities so people could put in smaller amounts of $100 or $200 so we could have thousands

The BAKKEN MAGAZINE FEBRUARY 2014

of investors each with a smaller stake,” he says. “I would have loved to have had Mainstream a few years ago.”

Although Anderson believes infill drilling is making it harder for smaller investors to participate in the Bakken, there is evidence that if investors can purchase leaseholds for spacing units complete with AFEs and four-well drilling programs, there is a bright future or a return on investment by 2020. The North Dakota Department of Mineral Resources has already permit-

EXPLORATION & PRODUCTION

ted roughly 2,000 wells in 2014. Through 2019, the DMR has permitted almost another 6,000 wells. In 2014, 403 permits were approved on 1,280-acre spacing units that will have four wells, a number nearly double the next closest well permit. The second closest permit type totals 202 permits approved for 1,280-spacing units for 7 wells.

Regardless of the well count or the number of wells per pad, Mainstream offers a clear example of an investment company that is taking advantage of the start of the infill drilling phase in the Williston Basin. For Anderson, his team of oilfield veterans keeps his sights set on new investments. “The opportunity we have here, the scope and scale, is very exciting. This is a long-term play and it is going to be around for a long time.”

Author: Luke Geiver Managing Editor, The Bakken magazine lgeiver@bbiinternational.com 701-738-4944

PRODUCTION COSTS: The Mainstream Investor team analyzes several elements related to a potential investments, including the price that operators are receiving for Bakken crude.

PHOTO: MAINSTREAM INVESTORS LLC

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Register online at: www.montanaenergy.netTHEBAKKEN.COM

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PRODUCTS & TECHNOLOGY

THE

PROPPANT

PICTURE A self-suspending technology reveals the state of the proppant industry

By Luke Geiver

The proppant supply and manufacturing industry may be entering its golden age of existence, thanks to shale energy. The demand for raw frack

sand, resin-coated sand and ceramics is projected to increase for several years to come. The number of discrete fracture stages and the amount of proppant used per discrete fracture stage per well in the Williston Basin have both increased in the past five years with no signs of stopping. During the same period, lateral lengths have extended from an average of two-miles per well and are now reaching three-miles. In 2013, the U.S. onshore oil market set a record for completed fracturing stages, according to Houston-based energy market intelligence firm PacWest Consulting Partners. “Right now it is an exciting time in the proppant industry,” says Nick Johnson, vice president of marketing at Santrol, the oil and gas arm of Fairmount Minerals. “We are at the beginning of the market, I think.”

The incredible demand for proppant doesn’t mean the industry is solely focused on supply. Suppliers such as Santrol have not only invested in logistics and transloading facilities spread throughout

LAB WORK: This coating expert is looking at a microscopic sample of curable resin-coated proppant placed into the optical microscope, background. This work is necessary to determine resin-coating uniformity on the sand grains, which ensures optimal bonding in the wellbore

34

PHOTO: SATROL

The BAKKEN MAGAZINE FEBRUARY 2014

PRODUCTS & TECHNOLOGY

THEBAKKEN.COM

35

PRODUCTS & TECHNOLOGY

North America to distribute raw sand and other specialized products. They have also emphasized the future, forming research alliances and establishing research centers that will help discover or commercialize hightech, production enhancing options superior to raw sand. Santrol has created a research lab in Sugarland, Texas that offers the company, and potential clients, a chance to test and refine new Santrol products. Preferred Sands LLC of Radnor, Pa., opened a Houston-based technology center earlier this year.

“Innovation—whether through product or process—is critical in our rapidly changing marketplace,” according to Michael O’Neil, company founder and CEO. Saint Gobain Proppants, a global supplier of ceramic proppants, recently formed a collaborative effort with Texas A&M University’s Energy Institute, “to better understand the behavior of proppants in hydraulic fracturing operations,” according to the university. The North Dakota Department of Mineral Resources has completed feasibility research assessing the

36

use of N.D.-sourced material for N.D.-based fracking operations.

Santrol recently began production using a technology for a self-suspending proppant.

The technology, and the company’s focus over the past year on commercially proving and stocking the product, demonstrate the industry's willingness to manufacture next-gen proppants while also developing an ever-expanding logistics matrix that can provide every well operator with the specific proppant they need.

Substrate Agnostic Technology Brian Goldstein’s role for Santrol is very specific. Goldstein is the product director for the company’s self-suspending technology.

After purchasing the rights to the technology from a research and development company, he has been working with his team to commercialize a product he calls substrate agnostic. The product was developed to help completion engineers more adequately distribute proppant to the tip of the fracture and

The BAKKEN MAGAZINE FEBRUARY 2014

help fractures remain more conductive during flowback. “Historically these engineers have used viscosity agents and different fluids to move proppants accordingly, but there are additional costs and challenges associated with that,” Goldstein says. Those additives include guar gum, cellulose and even dieselbased fluids.

Santrol has developed what it believes is an entirely new class of proppant, a product that creates a buoyancy or suspension quality that once introduced into a fluid system, eliminates the need for additional fluid additives to be brought on site. “It is not a proppant substrate itself. It is a coating technology that gets wrapped around a proppant substrate,” he says. The substrate could be sand, resin-coated sand or a ceramic product of the user’s choosing. “It is substrate agnostic.” Resin-coated sands or ceramic products offer light-weight alternatives to sand, while also providing a more consistent and uniform shape that increases the proppant packs success in a given fracture.

PRODUCTS & TECHNOLOGY

SAND TYPES: From left, curable resin-coated proppant, powerprop precured resin proppant, Northern White sand

When the wrapped substrate is hydrated in a blending tub prior to going downhole, the substrate will swell. The swelling nature of the polymer wrap creates a large surface area of the substrate, an alteration that reduces the overall density of the proppant and gives the individual substrate a unique suspension capability. “This is really a transport technology, not a technology to improve

the substrate itself,” Goldstein says. “It’s not modifying the substrate that is remaining in the fracture.”

The innovation in the product isn’t just about its ability to swell and suspend a substrate for more efficient placement and movement during placement. According to Goldstein, the product doesn’t require specialized or additional equipment on the well

site. With the new product, completion engineers are looking to fold the product into their respective frack design theories and systems, he says. The ultimate result of the product is better hydrocarbon recovery. The suspended proppant allows for a better packed fracture that creates better well conductivity.

“I’m very comfortable that we view this as a game changing technology,” he says.

THEBAKKEN.COM

37

“This is top of mind throughout our organization. It is not to downplay any other technology that we have available, but it is very significant of what our attention has been over the last year.”

Commercializing Self-Suspended Proppants

PROPPANT PROCESS: This Santrol Technology Center scientist is preparing a proppant sample for surface analysis using an X-ray photoelectron spectroscope. The testing equipment examines surface interactions of individual chemical elements for bonding structure and optimal resin-coating. The sample will be loaded into the machine, background, after the correct alignment using the microscope in the foreground.

PHOTO: SANTROL

38

The BAKKEN MAGAZINE FEBRUARY 2014

Lab test results of the product and field tests in the Eagle Ford shale have also shown its effectiveness. A South Texas facility is now producing the product and other plants are slated to come online in the first half of 2014.

The company has already received serious interest from operators in multiple shale plays, including the Williston Basin. “We are building ahead of demand to address the interest level we are already seeing in the industry,” Goldstein says.

The effort to stock a supply of the product before it hits the market is a direct reflection of the proppant industry’s main hurdle: logistics. Santrol, like many proppant suppliers and manufacturers is sourcing multiple products from multiple locations for multiple end users in a variety of end points. Santrol currently operates five northern white sand

PRODUCTS & TECHNOLOGY

'There is some overlap in the products stocked in the Williston Basin, but there are also certain products that are stocked at only certain terminals.

We try to put products in the area where customers are using it.'

technology the proppant industry has to offer is still reliant on an equally sound logistics network. Earlier this year, UNIMIN Corp., a proppant supply company, announced it had contracted with Dakota Plains Holdings Inc. to build a proppant supply terminal at Dakota Plains Holdings’ transloading station near New Town, N.D. CN rail has made plans to spend $33 million to upgrade car-loading capacity and train velocity for its Wisconsin infrastructure, a move that will help the rail giant create a more robust supply chain and

help it to reach oil and gas shale basins. Both show the constant push to create a better supply chain for the innovative technology that is already in the works.

Author: Luke Geiver Managing Editor, The Bakken magazine lgeiver@bbiinternational.com 701-738-4944

Nick Johnson Vice President of Marketing, Santrol

mines with locations in Wisconsin, Illinois, Texas and Minnesota. The company has additional resin-coating facilities in Illinois, Oklahoma, Texas, Michigan, Denmark, Mexico and China. Throughout the U.S. and Canada, Santrol alone has 50 proppant terminals, including five in the Williston Basin. “There is some overlap in the products stocked in the Williston Basin,” says Johnson, “but there are also certain products that are stocked at only certain terminals. We try to put products in the area where customers are using it.”

To explain the variance in product type and customer preference, Johnson likes to cite an encounter he had with several completion engineers at an industry-related event. During a conversation on well designs, the engineers started to laugh, Johnson says. “They said you can’t compare and Eagle Ford Well to a Bakken well as they were laughing,” he explains, and then they continued, “you can’t really even compare an Eagle Ford well to an Eagle Ford well.”

Johnson uses the story to illuminate the reasoning for multiple Bakken terminal locations. And, the story shows that the best

THEBAKKEN.COM

39

EXPLORATION & PRODUCTION

Finding Answers

INSIDE

THE BOX 40

The BAKKEN MAGAZINE FEBRUARY 2014

Why Julie LeFever and the Wilson M. Laird Core Library are more relevant to the Bakken now than ever.

By Luke Geiver

EXPLORATION & PRODUCTION

The Wilson M. Laird Core and Sample Library has a very distinct smell. Inside the

18,000-square-foot drill cutting and core sample storage library, massive shelving units extend two-stories high. The shelves are stacked with cardboard box-

es containing rock drilled from the Williston Basin. The smell in the facility is a combination of all that cardboard, of the rocks and the slightest hint of hydrocarbon. Some of the boxes are 50 years old, others are five days. The white labels on every box reveal the Williston Basin’s history, detailing the year a well

was drilled and by whom. Julie LeFever, director of the facility for 20-plus years, is proud of the library, of the boxes, even the labels. She can point 20 feet in the air at a shelf of boxes close to the ceiling and tell you where the core samples were taken from and, in most cases, when. She is a career geologist, widely cred-

IT STARTS WITH THE ROCK: The core samples for the Bakken start in the 19,000 number range. A reboxing and relabeling effort has made the core's easier to track and find. Julie LeFever, pictured, is proud of the organizational effort.

THEBAKKEN.COM

41

EXPLORATION & PRODUCTION

'Just about the time we think we have something figured out, we get a new core in and it changes things.'

Julie LeFever Director, Wilson M. Laird Core and Sample Library

SWEET SPOTS: Companies, researchers and anyone else who visits the library has access to technology that shows hydrocarbons in the rocks.

ited with helping the world recognize the potential in the Bakken formation. She is a real-life example of a popular description of those who have combined a lifelong devotion and incredible talent into a singular focus: Julie LeFever has probably forgotten more about the Bakken than most experts will ever know.

Standing with LeFever last month as she pointed out random boxes of interest in the library, it was easy to see that LeFever knows her stuff. She’s become an accomplished organizer as well—a reboxing program was implemented a few years ago and is approaching completion. And, although her story has typically been fo-

cused on the past, it was also evident from listening to her that day that LeFever’s role in the future of the Bakken is as important as ever, and the woman sometimes to referred to as Mrs. Bakken has a story of importance that is only just beginning.

Alexander Energy Park is a platted,

subdivided site with a mixture of commercial and industrial zoning featuring 3 phase power and rural water readily available. It is located just 2 miles South of Alexander, ND along U.S. HWY 85 and the intersection of ND HWY 68 in McKenzie County near the Wild Bison truck stop. It sits midway between Watford City and Williston, right in the heart of oil country. With a total of 121.38 acres, the Energy Park has lots available ranging from 2.44-8.50 acres, all suitable for mixed use. Contiguous lots can be purchased for larger lot requirements if necessary.

Contact: Camp Creek Development Jack Dwyer 701.235.2040

42

The BAKKEN MAGAZINE FEBRUARY 2014

NORTH DAKOTA STRATIGRAPHIC COLUMN AGE MILLIONS OF YEARS BEFORE PRESENT

Rock Unit

Rock Column

Max Thick

FORMATION

EXPOSED UNITS SHOWN WITH IRREGULAR, ERODE RIGHT-HAND MARGIN

FEET (METRES)

350

LODGEPOLE

2,000 (600)

365

BAKKEN

110 (35)

360

THREE FORKS

240 (75)

357

BIRDBEAR

125 (40)

SOURCE: NORTH DAKOTA GEOLOGICAL SURVEY

A New Understanding “I think you can see by our facility’s usage that our rocks are important,” she says. “Just about the time we think we have something figured out, we get a new core in and it changes things.”

Operators are required to send drill

cutting samples to the library. They also send in core samples. The length of core pre-Bakken drilling days was typically 30 feet. A few years ago the length of core increased to 60 feet and today, Lefever says, cores are coming in at 300 feet. The majority of the cores are from the Bakken, although occasionally cores from the

Red River or Tyler formation will show up.

Activity on the east flank of the Williston Basin has generated cores from the Madison formation. The cores are now including the lower most Lodgepole formation, Bakken, Three Forks and now well into the BirdBear. “It is a significant expense to core that far, but the information it gives is

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New Rock Study For Future Production Stephan Nordeng, a subsurface geologist with the North Dakota Geological Survey, also studies the Bakken. He is currently researching how temperatures, kinetic energy and pressure determine oil generation rates in source bed rocks. Nordeng documented the work in a report, “Building the Science for Advancing Oil and Gas Exploration and Development in the Williston Basin.”

Because oil generation rates are related to chemical reactions that occur in organic matter, these studies are focused on defining the relevant physical and chemical properties of the petroleum-generating systems in the Williston Basin, Nordeng said in the report. “These include the chemical properties of the stratigraphic section that controls subsurface temperatures.”

According to Nordeng, petroleum accumulations in the Bakken happen as a result of two processes interacting: organic-rich shales producing petroleum and the ability of the petroleum to flow into the pores of surrounding rocks. Although most traditional oil and gas exploration efforts sought out highly permeable reservoirs (large pores), resource plays such as the Bakken that have lowpermeability rates are actually great oil producers. The low-permeability rates require high-pressure outputs by the petroleum flowing into the rock pores, a process that pushes water out of the pores.

“It is the presence of these abnormally high fluid pressures, caused by oil generation and expulsion, that permits substantial oil and, to a lesser degree, gas production to be obtained from the horizontally drilled and hydraulically stimulated reservoirs surrounding the Bakken source rocks,” he said. “Understanding the processes that cause overpressurized reservoirs may provide insights that can be used to explore for other similar petroleum accumulations.”

EXPLORATION & PRODUCTION

worth it. “Roughly 8 years into this they are still cutting cores because they still have unanswered questions.”

Some of the cores coming in to the library today, like the BirdBear and the lower Three Forks are giving LeFever access to rock she has never seen before.

Supplied with the new rock and a higher volume of Bakken cores, she is gaining an even better understanding of the Williston Basin. She is now going back to work on previous work with a new understanding of the formations. “Changes in the Bakken are pretty subtle, they don’t show up on well logs as much as we’d like them to.”

Some of her work has shown that rock not previously interpreted as reservoir rock is actually just that. “We are using the cores to look at source rocks in deeper formations. The more you know about what the source beds are doing, the more you know about what might be coming down for potential reservoirs

1

for future drilling.” In the Williston Basin, there are 15 active formations that produce hydrocarbons, she said. There is a lot of unknown potential in the formations above and below the Bakken. “You would think that in a basin where we have as many new wells as we do we would know more, but we don’t consider it a very mature basin as far as our knowledge base,” she says. “I anticipate there will be exploration in other units.”

For that to happen, it will take continued research and companies willing to invest in drilling. LeFever calls the Bakken a complex formation because it was once a shallow sea, and minor changes in that sea level affected large areas and made significant changes in the rock.

LeFever is, of course, not the only geologist to utilize the library. During my time there, I shared the lab with a team of five geologists from Whiting Petroleum Corp. Because of bad weather, the team had to drive to Grand Forks from

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WELL-USED: Whiting Petroleum Geologists scour multiple core samples. The team of five traveled through difficult winter conditions to make it to the Grand Forks facility.

Minneapolis. The lab is one of the main attractions and tools of the facility. Typically, industry teams or academic groups will schedule the lab for a week. Due to the current size of cores, the lab cannot adequately function with more than one group at a time. The team sizes vary from three to seven. On average, the teams will move anywhere from 3,000 feet to 6,000 feet of rock out of the library and into the lab. In 2013, the lab was in use every week of the year minus a few off weeks used for the reboxing efforts.

The building generates a lot of money, and drilling decisions are made based on what a lot of these companies, like Whiting, see in the rock, LeFever says. By 2016, the facility will be at storage capacity. The team in Grand Forks is already working with architects to revamp the building. The team in Grand Forks is already working with architects to revamp the building, and approval of an expansion footprint would have to be made by the Board of Higher Education. The library currently contains 86 percent of the cores cut in North Dakota, a number that would be higher if it weren’t for wells permitted that are never actually drilled.

LeFever is frequently asked to speak or present to other geologists and at industry events, a task she says that still hasn’t stopped her from continuing her work in grasping the truth of the Williston Basin. “The Bakken has changed my life in a positive way.”

The formation won’t produce forever, she says. But, by the time production stops in the Bakken, other formations could offer new opportunities. The play is receiving global attention that is welldeserved. “I think the rocks are key to developing this play,” she says, “I think the Bakken has become, and will remain, very important.”

Author: Luke Geiver Managing Editor, The Bakken magazine lgeiver@bbiinternational.com 701-738-4944

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The BAKKEN MAGAZINE FEBRUARY 2014

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PRODUCTS & TECHNOLOGY

HELP WANTED Attracting quality employees is just the first challenge, retaining them is as important.

By Keith Loria

Job openings greatly outmatch the jobless in North Dakota, locking companies working in the shale development region in a fierce battle to win the war for talent. This has

forced employers to up their games when it comes to salaries and benefits in an attempt to lure away already trained workers from the competition. Workers are not averse to chasing after the next big opportunity, especially as competing companies constantly sweeten the pot.

“People from all over the U.S. are flocking to North Dakota because they want to be part of a modern-day oil boom. Whether they hear it from friends, family, or the media, job seekers are excited about the sheer number of opportunities, the benefits, and the money to be made,” says Joann Timperly, district manager for Elwood Staffing, with an office in Williston, N.D. “One of our challenges is to identify the right candidates from among the many that apply. Even at entry level, field support does require a certain skill set and aptitude, as well as the fortitude to handle the hard work, long hours, and extreme weather conditions.”

Of course, client-specific screening criteria must also be met and the staffing agencies often supplement the organic candidate pool with recruits from targeted job fairs, online advertising and social media campaigns, and rely on its candidate networks to re48

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PRODUCTS & TECHNOLOGY

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PRODUCTS & TECHNOLOGY

fer individuals with the necessary experience and/or technical education.

Allan Greer, recruitment manager for NES Global Talent, which places hundreds of people in the Bakken each year in various oil and gas companies, says offering employee top-of-the-line perks is often necessary to secure workers.

“The ways our clients have attracted the best talent to the Bakken include offering above-market salaries, paying for relocation and making housing available on arrival, even helping with a purchase of a new property,” he says. “They put a lot of effort to bringing these people aboard and the last thing they want to see is someone jump ship to a competitor or leave the Bakken entirely, so they are flexible with things like hours and time off.”

Also, healthcare is something very important to a lot of workers and the medical plans the companies offer are very attractive.

Clayton Gammill, principal, human capital for Ernst & Young’s Oil & Gas prac-

50

CODE FOR SUCCESS: Creating a path for individuals to come in at an unskilled level and advance with proper training is essential for building a specialized workforce.

tice, says the competition among all the different employers in the area makes it difficult to not only find the right people, but also to keep them for a significant amount of time.

Finding people who are looking for career advancement and long-term opportunities is vital.

“Companies can make great profits, but

The BAKKEN MAGAZINE FEBRUARY 2014

the key to success is finding those people to operate the technology without driving up cost significantly,” he says. “This is a business where people chase the money, but performance-based bonuses don’t always work. For many of these jobs, you are dealing with high-tech, high-dollar operations, and finding that experienced staff to import

he says. “Even if it takes additional education and helping to front that, it’s something companies need to consider.”

Finding Talent

in requires you to think outside the box—be it with spot bonuses or equity or something else appealing.”

Adam Berk, a principal in Ernst & Young LLP’s human capital group, adds that the real key is training people to achieve at higher positions rather than constantly going out and finding new people. This is especially

important since many of the jobs will eventually transition into requiring a more specialized workforce.

“Historically, this has been an industry that tends to buy its resources, but cracking the code to success may be in creating a path where an individual comes in at an unskilled level and you get them to that skilled level,”

Companies operating in the region compete strongly with one another for the limited pool of experienced local workers.

A spokesperson from Sidewinder Drilling Inc. says it recruits in the region using a branding strategy that emphasizes the company’s culture, leadership, strategy, stability and financial performance.

According to Timperly, while the staffing company places midlevel and senior roles, its clients’ primary needs are in areas of field support, such as equipment operators, diesel mechanics, and lab technicians.

“We have found that it is not the skill set, but the inclination of the applicant that makes any given position easier or harder to fill,” she says. “Our biggest challenge is finding individuals with demonstrated job stability. We, and definitely our clients, make a big

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PRODUCTS & TECHNOLOGY

BUILDING THE WORKFORCE: From construction jobs, to roustabouts to service workers, the sheer numbers of opportunities excite job seekers. Making the right match of skill and aptitude to the job is the challenge for recruitment managers.

investment in each candidate—recruiting/screening, onboarding, training, etc. Any attrition affects production, which in turn affects the bottom line.”

Greer looks for candidates with solid work histories—those who show an inclination to remain loyal to their employers. These individuals can be difficult to find, he says, but they are definitely the easiest to place, no matter the position.

Semerad relies on job boards and social media for finding people to come to the area, but says that referrals from people already on the job are his No. 1 way of finding people. Meanwhile, Gammill says he has tried everything from recruiting on campuses to expanding newspaper ads outside the state to reaching out to skilled laborers in like-minded industries. Still, competition is fierce.

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Love What You Do Kevin Semerad, regional vice president at Command Center Inc. and its division Bakken Staffing, says that employee turnover is happening at a higher rate than normal and companies are working on ways to improve loyalty.

“To maintain employees and keep them happy, aside from staying competitive with salaries, you want to make sure your culture is strong,” he says.

“Assuming all other things are equal, you need to provide them a situation where they are happy and enjoy being at work, and this will help retain employees.”

Ellwood Staffing believes it retains great associates because it offers what they need

most—flexible scheduling, the ability to take care of their health with portable insurance, the option to save for retirement, and the opportunity to continually build their skills.

“Though they are on assignment with our clients, our associates are our employees and are part of the Elwood family. Obviously, the weather and the long hours are out of our control, but we can give our associates encouragement, support, and an ear to listen,” Timperly says. “Whenever an associate comes to see us, we want to make sure they love what they’re doing and leave satisfied knowing that their hard work is helping them— and their families—improve their quality of life.”

RETENTION STRATEGIES: Turnover rates are high in the Bakken, making employers aware that competitive salaries are only one part of keeping employees. Strong company cultures that care about people help to retain employees.

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PRODUCTS & TECHNOLOGY

Housing Issues According to Semerad, housing is also a major factor when staffing, one that can by itself determine whether a candidate moves to the area to pursue work.

“Prices have skyrocketed beyond levels anyone would have expected, and although they are leveling off a little now, it makes bringing people in difficult,” he says. “Workforce housing is also in limited supply and it’s not conducive for family-type living, so that plays a role in people’s decision as well.”

Many of the companies in the Bakken do not have the facilities to house temporary employees; which are reserved for their full-time employees. Even with new construction, the vacancy rates in the oil towns are generally less than one percent, and sky-high rent prices reflect this supply and demand.

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Through the Years Things weren’t always so difficult with finding qualified candidates for jobs, but it changed when the oil boom came about.

Seeing the opportunity, Elwood Staffing opened its first North Dakota office in Williston in January 2010 to support its oil and gas clients with their workforce needs.

“Having supported these customers in other markets—Texas, Wyoming, Colorado, and others—we knew our remote market service experience, combined with our grassroots and large-scale national recruiting expertise would prove valuable here,” Timperly says. “Even so, that first year did bring its challenges as people’s perception of North Dakota as being a little too far off the beaten path did cause some to question relocation.”

Media coverage of the North Dakota oil boom over the past few years has been the biggest proponent of that perception.

Television broadcasts, newspaper articles, reports during the recession of the disproportionate employment rates as compared to the rest of the country, all served to fuel the fire.

“The word got out that work and good wages were to be found in North Dakota.

The sheer volume of phone calls, emails, and online applications we receive each day is unprecedented,” Timperly says. “Our focus has shifted from attraction to evaluation—identifying the candidates with the qualities our clients desire and initiating the screening and hiring process.”

Glendive Wibaux

Terry

selves priced out of the market and unable to secure housing,” Timperly says. “Elwood encourages job seekers not to move to the area until they have made housing arrangements and provides information sheets with contact information for local apartments, property management companies, and RV parks.”

e Beach

Author: Keith Loria Freelance Writer freelancekeith@gmail.com

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PRODUCTS & TECHNOLOGY

FIELD-TESTED FLUID

ADVANCEMENTS Downhole fluids and dispersal methods designed for the Bakken

By The Bakken Magazine Staff

Jerry Noles is everything the Bakken shale play should be about. He has worked for more than 30

years in snubbing, well control, work over and coiled tubing in various oilfields. He worked on the second horizontal well ever drilled in the Barnett Shale and he is credited with completing the first successful coiled tubing, horizontally directional drilled well in the Lower 48. Like so many other service providers in the Bakken, he’s learned how to leverage his experience into the Bakken. In 2009, Noles helped start a chemical and fluid manufacturing company designed specifically for the Bakken with Danny Wesley, now president, and Jason Watts, now vice president of manufacturing. Coil Chem LLC now has two locations in North Dakota and its path from a startup to a proven entity in the Williston Basin shows that innovation, efficiency gains and technology advancements aren’t limited to large equipment or major strategy changes. In the case of Noles, technical director and CEO for Coil Chem, developing a system to disperse precise chemical doses into the wellbore has helped several Bakken operators reach total depth (TD) faster and remove previously irremovable wellbore plugs.

Downhole Chemistry and Cake-Making The Oklahoma-based company started developing a better fluid mixture for friction reducers, drilling fluids, rod lubes and several other products in 2009. For an entire year, Noles and the team researched the variables the chemical mixtures should address. During its research efforts, the company developed a fluid mixture delivery system that has also helped the company solve a major issue on the well site. “The manufacturers of the chemicals really didn’t understand the applications of the products, and the applicators really didn’t understand the properties of the products,” Noles said of his research into the process of deploying friction EXPERIENCE MATTERS: Jerry Noles worked on the second horizontal well ever drilled in the Barnett Shale. He founded Coil Chem in 2009 for two reasons: to eliminate the improper administration of downhole fluids and to provide a better engineered downhole chemical product suite.

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PHOTO: COILCHEM LLC

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reducers or other chemicals into the wellbore during drilling or completions. Because of the disconnect, Coil Chem has since built its own chemical manufacturing facility in Louisiana and its own self-contained unit designed to disperse the chemical mixtures in a precise way.

When a customer calls Coil Chem in North Dakota, a team from either Dickinson or Alexander will drive a self-contained unit to the well site. Once the team is on site, the unit will be hooked into the water storage or frack tank set-up. When the high-pressure pump is turned on, the Coil Chem unit will sense the draft and begin dispersing a pre-set, programmable mixture of chemicals into the water stream. If the high-pressure pump turns off, slows down or ramps up, the Coil Chem unit will respond in unison, eliminating the waste potential or inaccurate mixing of any product If a customer is happy with it's fluid introduction system, the company can also supply it's downhole products in bulk.

The dispersal system has become a crucial component of the company’s services.

“We needed something that would work to introduce the chemicals and would automatically adjust to the exact dosage ratio required,” Noles said. “We needed a system that was more reliable than a worker standing on a batch tank pouring in fluid and keeping track of the ratio by counting the number of buckets laying on the ground.”

The idea behind Coil Chem’s products is to provide a pre-mixed, quality-assured product. The team doesn’t buy off-the-shelf chemicals, it buys the raw ingredients and formulates its own mixtures in Louisiana. To date, the company has worked in every shale play in the U.S. and ships products and dispersal units internationally. Regardless of where a well is, the well bore trajectory and basic geometry of a horizontal well doesn’t change radically from shale play to shale play, Noles says.

“We want to provide chemistry that removes the decision making process for field level operators,” Noles says. “I make the analogy that it is a lot like baking a cake. If someone shows up and they drop off the ingredients and they say bake a cake, every chef in the place without a recipe is going to bake that cake differently. They will also bake it based 58

The BAKKEN MAGAZINE FEBRUARY 2014

FORGET OFF-THE-SHELF: Noles brought on a team of chemists, one with 30-plus years of experience at a major oil company. The chemists have designed products specifically for the longest laterals in any shale play. The products are made from food-grade materials and are environmentally friendly.

PHOTO: COILCHEM LLC

on their experience level and their preferences.” The Coil Chem approach, to use the analogy, is to provide a premix batter so the only thing the people on location have to do is add water.

The process has already paid large dividends for customers in the Bakken. When Noles and his team first started servicing clients in the play, operators were experiencing random successes and failures in multiple

PRODUCTS & TECHNOLOGY

wells. “We had customers that were leaving anywhere between 10 percent to 20 percent of their plugs intact. They had already drilled and fracked the well, the just couldn’t remove those zonal isolation plugs from the wellbore. They were leaving potential reserves in place that they had already paid for,” he says. By utilizing the friction reducer and the pipe lubricant products, Coil Chem was able to help the companies better access the well bore and remove the plugs.

The chemistry and disper-

sal system is also helping drilling teams reach total depth more quickly. A drilling rig operator who deployed the system for the first time on a well in the Bakken posted a lateral length drilled over a 24-hour period of 1,700 feet. Using the drilling fluid and dispersal unit developed by Coil Chem, the same operator recorded a lateral length best of 3,200 feet over a 24-hour period.

The estimated savings from the drilling efficiency gains were $200,000 according to the operator.

To date, the most popular products in the Bakken are the friction reducers and pipe-onpipe material. For Noles, the Bakken has been the ultimate proving grounds for his company, and a play that will help his company anywhere in the world. “The thing about the Bakken is that the longer the lateral, the greater the technical capacity has to be. The Bakken is a great market for us because we designed our products for it.” The suite of products combined with the dispersal units were formulated for the harshest conditions, Noles said, including pressure and temperatures. The products were also formulated to stay productive in longer length laterals, a trend that is fast becoming the norm in the Williston Basin.

“The Bakken has really set the benchmark for extended laterals.

What is learned in the Bakken will be used in other shales,” he says. “If you are going to be the best, you better test your products in the Bakken.”

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Q&A

Following a Trail Blazed

by Lewis and Clark The Port of Vancouver’s Curtis Shuck on how a commitment to infrastructure will provide much needed market access for Bakken crude.

Questions By Tim Portz

Roughly 1200 miles separates the Port of Vancouver USA from Williston, N.D., and the fastest growing oil play in North America.

The port, a mainstay in the maritime shipping complex on the West Coast, links domestic and international markets with the commodities of the country’s interior. Now, with the port’s Board of Commissioners approving a 10-year lease to the joint venture of Tesoro and Savage, steadily increasing volumes of Bakken crude will move to the port, through the newly planned Vancouver Energy Distribution Terminal and then on to the refineries that dot the West Coast. Curtis Shuck, director of economic development and facilities at the port shares his earliest impressions of the Bakken and the excitement he and his team share in providing seamless access to the refining capacity needed by the region’s growing production.

You’ve spent the bulk of your career in port management and development. What do you find most intriguing about your work?

First, it would have to be the amazing team that I get to work with each and every day and the second would be the port’s 62

mission. These two specific elements are what get me out of bed in the morning. They bring together a creative and collaborative environment that is unlike any I have seen before and allow us to do great projects, benefiting our community and this region. The variety and volume of these opportunities right now is unprecedented and that makes for an exciting challenge of prioritization and dedication of our precious and limited resources.

In general terms, can you describe the distribution of tonnage moving through the port and where does the port business come from?

The port has a diverse portfolio of cargo moving through its facilities and the majority of it is exports. From agricultural products like wheat, corn and soy beans to scrap steel, wood pulp and mineral bulks.

These commodities originate in the Western United States and Canada and move to the port, primarily via rail. On an annual basis we handle roughly 5 million metric tons. We also import products such as refined liquid bulk and petroleum prod-

The BAKKEN MAGAZINE FEBRUARY 2014

ucts, Subaru automobiles, wind energy components, steel of all types, configurations and sizes and South American pulp. Our niche is providing costeffective, streamlined handling of bulk and break bulk cargoes.

What was your introduction to the Bakken region?

My first trip to northwestern North Dakota was Oct. 24, 2012, when I came out to visit a crude oil transloader to see if there might be opportunities for a West Coast rail solution involving the Port of Vancouver USA. Arriving in Williston reminded me of growing up in Anchorage, Alaska, in the 1970s during the height of the Alaska North Slope Program. The primary difference being that in North Dakota the oilfield was relatively easy to access whereas in Alaska the exploration and production activities were so remote.

PHOTO: MAXM STUDIO, VANCOUVER

Q&A

What was your first impression?

The aha moment for me was seeing firsthand the need for all types of services and supply materials, the opportunities to add value and make a difference in this American renaissance, and all of the great people. This was way bigger than just oil and gas, this was about developing a supply chain that supports our partners in the midcontinent who are building sustainable communities.

What has the Port of Vancouver USA been doing since that first visit?

We have been diligently looking at ways to enhance the supply chain serving America's heartland and being part of that system fix that’s necessary to help take the industry to the next level. We’ve been working to find ways we can enhance the trade route to the Pacific Coast that was first mapped by Lewis and Clarke during their Corps of Discovery. We call it the Advantaged Supply Chain. As part What types of things are you of this strategy, we are pleased hearing from the industry? to announce the opening of the port's Williston, North Since that time, we’ve been meeting with producers, service Dakota field office effective Jan. companies and transloaders and 1, that will provide boots on have heard consistently that the the ground and put our team most critical need among all of directly in the oil patch to supthese folks is reducing and con- port our customer service and trolling transportation costs, im- business development efforts. proving margins and increasing What makes the Port of reliability. Our goal is to assist Vancouver USA such a vital these businesses in their efforts waypoint for the movement to move the industry from an of crude oil and other energy exploration and lease protection related products? period into more of a producReally, it’s location, location, lotion mode. This is similar to cation, and state-of-the-industry the manufacturing evolutionary infrastructure. The Port of process that requires the entire Vancouver USA is the closest system, including the supply port to the mid-continent cachain, to grow and improve pable of providing deep-water simultaneously. Advances in access to get these products technology in the oilfield are to market, leveraging the same great but cannot realize their supply chain that serves the full benefits unless the system safe and efficient movement of gets up to speed right along agricultural products. with it.

How does the Vancouver Energy Distribution Terminal Project fit into the Port of Vancouver USA’s business?

From the perspective of facilities, the proposed Vancouver Energy Distribution Project, a joint venture between Tesoro and Savage Services, is able to utilize both the port’s existing marine terminals and portions of the West Vancouver Freight Access Project rail infrastructure, the port’s $275 million investment in rail infrastructure.

The proposed oil terminal is just one example of how the port is realizing a return on those infrastructure investments, which in turn, will provide reinvestment opportunities that generate new jobs and support economic vitality for our community—the primary mission of our port.

The port’s been handling liquid bulks for decades, and we’re good at it. The port and its customers have been safely operating this business for over half a century, since 1959. The port maintains a diverse portfolio of cargo, including petroleum products, that helps to provide economic stability to its business. This provides economic benefit to the community in the form of tax revenues ($1.6 billion annually) that support schools, police, fire, libraries and other vital services, along with direct, indirect and induced employment for the region. Currently, more than 2,300 people

work directly for businesses at the port, with nearly 17,000 total jobs in the community and region that are related to port business activity.

What are the biggest challenges facing the proposed Vancouver Energy Distribution Project?

Our focus is on public safety and environmental protection considerations of this project.

From the very beginning, we’ve been very clear that our expectation is that the Tesoro-Savage team will deliver a facility that is state-of-the industry when it comes to safety. That’s still our expectation and we’re paying very close attention as the projects moves through a rigorous environmental review process.

The port has been a part of the Vancouver community for more than 100 years, and we want this done right. Of course, our lease is contingent on the project being issued all necessary permits on the local, state and federal levels, but we’re also going to conduct our own review of the project’s safety and operations plan. Before one drop of oil moves, the Port of Vancouver USA will have to be satisfied that the safety of our community and the protection of the environment is fully addressed.

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IN PLAY

THE DREAM: The facility will house the Department of Petroleum Engineering and host industry partners on research projects.

PHOTO: UNIVERSITY NORTH DAKOTA COLLEGE OF ENGINEERING & MINES

The Collaborative Energy Complex: Research and Partnerships

By The Bakken Magazine Staff

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The BAKKEN MAGAZINE FEBRUARY 2014

The University of North Dakota’s Collaborative Energy Complex is the most impressive facility in the state capable of connecting the oil and gas industry to petroleum research partners and future employees. The CEC, however, doesn’t exist yet. With private donations from alumni, companies and the oil industry itself, the facility is on track to the $10 million required to

build and outfit the 30,000-squarefoot complex. Dan Muus, director of development for the College of Engineering & Mines, is one of several from the University who is working to make the facility a reality. Muus has worked with private industry to explain the merits of the CEC, and with several million already raised and several other interested oil industry partners in talks with Muus, the CEC will soon be more than a dream.

“The College of Engineer-

IN PLAY

THE VISION: Dean Hesham El-Rewini has overseen dramatic growth in the College's student enrollment. Now he is looking to connect enrollment with industry.

PHOTO: UNIVERSITY OF NORTH DAKOTA COLLEGE OF ENGINEERING & MINES

GUIDED BY INDUSTRY: Steve Benson, chair of the Department of Petroleum Engineering, is developing research efforts for his students based on industry desire.

PHOTO: UNIVERSITY OF NORTH DAKOTA COLLEGE OF ENGINEERING & MINES

ing & Mines should be working on big things,” says Hesham ElRewini, dean of the college. “If you look at the U.S. in the past 10 years, people are concerned about energy and jobs. We can address both.”

According to El-Rewini, North Dakota’s oil industry hopes he’s right. The industry has created a massive demand for petroleum engineering students.

El-Rewini helped supply those students by forming the Department of Petroleum Engineering and staffing it with several oil industry veterans and researchers.

The Department of Petroleum

Engineering started out with only four students, but has since grown to well over 200. “Our research expenditures from external companies has also doubled.

We have increased our faculty by 25 percent.”

The CEC, a project the dean calls the most important in the state due to its relevance and potential for supplying the Williston Basin with state-based research and employees, is the next step in the incredible growth of the College of Engineering & Mines.

The name of the facility was a factor in the vision for the work to be done. “We will have a wing

in the facility where faculty members from all of UND can work to address issues above and below ground. Producing technology is meaningless unless we have an understanding of its impact,” he says.

Industry partners will have access to the students and the research work by those of Steve Benson, chair of the Department of Petroleum Engineering and his staff. As Benson would say, the industry is driving the research efforts that he formulates for his students.

“Our ability to provide the oil industry with graduates and interns is crucial,” El-Rewini says. In addition to housing Benson’s students and staff, the facility will also be home to the newly created Institute of Energy Studies. The newly formed entity will help the public, including royalty owners, and private industry, including those not well-versed in the technical

side of the industry, learn more of the industry. A two-day short course has been designed to explain everything from exploration and production processes to enhanced oil recovery.

“We are here to help the industry and provide them with the best students,” El-Rewini says. For the oil industry, the CEC could truly become a dream facility. The CEC willprovide access to the HaroldHamm Virtual Core Library, and provide future experts to an industry the dean says is overcrowded with baby boomers. And it will turn the term collaboration into innovation.

That is the dean’s message and Muus’ too. Someday soon that message will come to fruition.

“When we say collaborative, we really mean it,” El-Rewini says.

“Contact us.”

THEBAKKEN.COM

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CONTRIBUTION

Leveraging the Bakken’s

“High Ground” Unmanned aerial systems provide a new tool in an era where information is power

By Mohammed A. Khan, Jr.

Unmanned aerial systems (UASs), also sometimes referred to as Unmanned aerial vehicles and “drones,” have transformed the modern context of monitoring wide geographic areas with persistent and long duration airborne capabilities. While manned aircraft will continue to play a key and essential role in all facets of air operations, there can be no doubt that UASs of all shapes and sizes will dominate the insatiably growing appetite for real time situational awareness. In an era where information is power, UASs will provide opportunities for increased revenue through safe and efficient petroleum and natural gas exploration in the Bakken Formation.

Bakken Imperative The Bakken Formation encompasses an area of approximately 200,000 square miles, a huge swath of North Dakota,

66

Montana, Saskatchewan and Manitoba. How is this area monitored, secured and managed?

Certainly current terrestrial-based methodologies utilized to monitor the day-to-day operations in this wide expanse may indeed employ advanced technologies but lack the flexibility, wide area range, and persistence that UAS technologies now provide. Major companies like BP, Shell and others fully recognize the importance of UASs. In fact, BP has conducted small UAS technology testing focusing on pipeline inspection and safety in order to help crews evaluate operations status and maintenance requirements.

Having proven themselves as invaluable above the world’s battlefields, the UASs of today and tomorrow will continue to be utilized to provide highly capable sensors producing detailed geospatial situational awareness needed by a growing domestic and international customer base. UASs not only deliver technologically advanced situational awareness, but they provide these capabilities

The BAKKEN MAGAZINE FEBRUARY 2014

while also remaining scalable and affordable; therefore, they have absolute relevance in the domains of safe and profitable operations, maintenance, logistics, sustainment and modernization within the Bakken’s petroleum and natural gas industry.

The basic construct for an end-to-end unmanned aerial system is comprised of the platform, the sensor suite, the data links/ data management/software analytic tools, and a command-andcontrol capability.

Platforms UAS platforms are widely available on the domestic and international market in all shapes, sizes, prices and capabilities. For very exclusive customers with government approvals in place, and with very robust fiscal resources, large UAS platforms like the Northrop Grumman Corp.'s Global Hawk at about $35 million to $75 million per unit, provide exquisite mission capability. At the other end of the UAS platform size spectrum, Amazon’s

“Prime Air” concept highlights the growing business case for leveraging small UAS platforms (at about $2,000 per unit) to support its mission and customer needs.

In order to support Bakken petroleum and natural gas industry requirements, small UASs,

CONTRIBUTION

AERIAL OPTIONS: The unmanned aerial vehicles suitable for the Bakken would be on the smaller size, lower cost range PHOTO: ATK SPACE SYSTEMS DIVISION

such as Boeing’s Scan-Eagle, or larger medium-altitude long endurance platforms such as the RQ-1 Predator, would certainly contribute to the needs of Bakken industries. Both platforms are capable of day and night missions that can last in excess of 15 hours while providing comprehensive monitoring of pipeline, oil rig and wells, infrastructure, road networks while aiding logistics facility management and security monitoring.

Sensor Suites UAS platforms host a wide variety of sensor suites that would be exceptionally relevant to the needs of Bakken industries. The only limiting factor for the hosting of a sensor suite by a platform is the sensor suite’s size, weight and power requirements. With the seemingly endless growth and evolution in both the platform and sensor suite capabilities, customers now have the ability to acquire tailored solutions specific to their needs, and financial resources.

THEBAKKEN.COM

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CONTRIBUTION

Camera systems, with highresolution visual capabilities, are the most popular sensor suites in the UAS domestic and international marketplace. Depending upon customer needs, requirements can be satisfied by scalable sensor technology from small off-the-shelf cameras to complex and robust turreted systems.

Many UAS platforms are able to host day and nighttime imaging sensor suite capabilities. The ability to image in both daytime and at night allows for sustained operations and is critically important for flexible and responsive UAS capability. The voracious demand for imagery is growing exponentially in the UAS marketplace and its applications to the Bakken are obvious.

Within the petroleum, natural gas and mining industries, a growing UAS sensor suite requirement is for highly capable hyperspectral imaging systems in the mid- and long-wave infrared spectrums. These very capable systems contribute to safe, costeffective and environmentally responsible resource exploration.

In the event of petroleum and natural gas exploration anomalies, these highly sensitive systems can detect spectral irregularities and provide accurate and actionable situational awareness for emergency response.

Multiple, Tailored Data Tools UAS platform capability to store data from the sensor suite and compress, process and transmit the data can also be tailored to a customer’s needs. The question is whether the data is needed 68

THE RESULT: The EarthVision structural model displays a terrain with well data and surface imagery PHOTO: DYNAMIC GRAPHICS INC., BAYLOR UNIVERSITY, MARATHON OIL CO.

in real time, or if a customer can afford to wait until the data after the UAS mission is completed and the data is downloaded from on-board storage.

For real time requirements, the information ingested requires an on-board data link technology to transmit via line-of-sight technology, or by leveraging satellite communication relay links to ground control stations and ground data terminals. Terminals may also include smart phone application technology). The disseminated data collected by the UAS platform sensor suite is either received in its real time “raw” data format, or is managed by some level of software analyt-

The BAKKEN MAGAZINE FEBRUARY 2014

ics tool. Agile software analytic tools are critical to making data received actionable.

Many domestic and international software analytics companies provide solutions to making data actionable for customers.

The key is to ensure the software provides the kind of actionable data that is required and needed by the customer. For the Bakken’s broad exploration efforts, this data needs to be displayed in what is termed by many in the UAS community as a “common operating picture.” This COP shows disparate geospatial data (potentially including light detection and radar (LiDAR) information, from visible, infrared,

hyperspectral and space-based imaging technologies in a layered display. The COP then overlays this information with geophysical, geomagnetic and seismic data and provides notifications to alert exploration opportunities and anomalous events.

Command and Control The ability to safely and responsibly command and control UASs is critical, and is at the forefront of the ongoing United States national dialogue on airspace management. On Dec. 30, the Federal Aviation Administration announced that North Dakota was designated as one of the six test sites for UASs that

CONTRIBUTION

efforts in UAS mission areas by the University of North Dakota, here is an opportunity for Bakken industries to collaborate with a prestigious aerospace institution to help develop a common UAS concept of operations.

UAS operations are globally expanding at an explosive pace and are readily recognized as the fastest growing market in the aerospace industry. The Bakken’s petroleum and natural gas industry has the perfect opportunity to invest in and harvest the benefits of this capability to greatly fortify its profitable, safe, secure and environmentally responsible exploration activities.

SMALLER FLIGHTS: The UAS option, like the Amazon-designed version pictured here, cost roughly $2,000 per unit.

PHOTO: ATK SPACE SYSTEMS DIVISION

will assist in the research efforts aimed at integrating unmanned aircraft with manned aircraft in the national airspace. This announcement promises to be very beneficial for the Bakken’s future opportunities to operate UAS technology for the benefit of pe-

troleum and natural gas exploration.

The nerve center of UAS operations is the ground control station, which can vary in size depending upon the systems complexity and may require a robust dedicated fixed base facility,

a mobile capability, or a smaller more portable and compact command and control element.

A vast majority of UAS operators have multiple command and control stations in order to ensure redundancy in operations—and considering the superb ongoing

Author: Mohammed A. Khan, Jr. Colonel, USAF (Retired) Senior Director, Government, Commercial and International Business Development, ATK Space Systems Division 301-902-4438 Mohammed.Khan@ATK.COM

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EXHIBITORS _____________________________________________________________________________________________________ 3M - Oil and Gas/Electrical Absorbent & Safety Solutions, LLC Acme Tools AE2S Water Solutions Alliance Truck and Tank Sales LLC Allied Valve, Inc. Applied Remediation, llc Aramark Uniform Services Astro-Thermal-Tec Ltd Bakken Frontier, LLC Bartlett & West Bayco NightStick Beaver Creek Archaeology, Inc. Bert's Truck Equipment, Inc. Bismarck-Mandan Development Association BKT BMT Acquisition, LLC Boerger, LLC Border States Electric Boyd and Company Construction, LLC Brahma Group Inc. BWFS Industries, LLC Building the Bakken Capps Van & Truck Rental Castagra Products, Inc. Cenex Lubricants Centek Inc. Chaznline Construction Chemline, Inc. Cirrus Aircraft City of Grand Forks: Access the Bakken CoilChem LLC Command Energy Service

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NOMADIC™ Systems Inc. Nordic Pipeline Services, LLC North American Industrial Services North Dakota Association of Oil and Gas Producing Counties P2 Energy Solutions Park Construction Company Peak Oilfield Service Company, LLC Pinnacle Engineering, Inc. Port of Vancouver USA Power/mation Presto Geosystems R&R Contracting INC. RDO Truck Centers RecyClean Services Rig Mats of America, Inc. RigData Roeslein & Associates, Inc. Rossco Crane and Rigging Inc RWI General Contractors S2S, LLC SCFM Compression Systems Shale Plays Media, LLC Shuttlewagon, Inc. SignalFire Telemetry Staybridge Suites Grand Forks & Minot Subsurface, Inc. Superior Drilling and Coring Team Torque Inc. Telogis & Select Ford of Williston The Aleut Corporation The Score Group Thunder Butte Petroleum Services Tornado Combustion Technologies, Inc.

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