November 2013 - The Bakken magazine

NOVEMBER 2013

Flaring

Evolution New Technologies, Infrastructure Improving What We Know (And See) Page 16

Plus:

The Making of an Multi Continent Energy Powerhouse Page 24

AND:

A Better Way To Track Shale Production Page 32

Road Construction Worthy of Attention Page 30

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CONTENTS

NOVEMBER 2013

VOLUME 1 ISSUE 8

DEPARTMENTS

MAKING IT

30 Historic Construction

Pg 16 PRODUCTS & TECHNOLOGY

Aware Of The Flare How innovative technologies and strategies combined with a better understanding of Williston Basin shale gas are transforming the practice of flaring.

BY LUKE GEIVER

A U.S. Highway 85 bypass rerouting the oilfield corridor traffic around Watford City, N.D., is in progress.

BY THE BAKKEN MAGAZINE STAFF

IN PLAY

32 Shale Production Reporting’s New Era

The EIA rolls out a system tailored to track and predict shale oil production.

BY THE BAKKEN MAGAZINE STAFF

Pg 24 INFRASTRUCTURE & CONSTRUCTION

Leveraging The Energy Culture

6 Editor’s Note

North Dakota and Norway share more than cultural history. The two are collaborating to build an energy powerhouse.

8 ND Petroleum Council

BY LUKE GEIVER

A Proving Ground For Problem Solvers

BY LUKE GEIVER

New Perspective

BY TESSA SANDSTROM

10 Bakken News

Bakken News and Trends

ON THE COVER: A Steffes Corp.-engineered flare creates a cleaner, more translucent flame.

PHOTO: STEFFES CORP.

THEBAKKEN.COM

5

EDITOR'S NOTE

A Proving Ground For Problem Solvers Luke Geiver

Editor The Bakken magazine lgeiver@bbiinternational.com

It’s no coincidence that flaring is the hottest topic for regulators and industry decision makers responsible for developing the Williston Basin’s oil and gas resources. The associated gas created during the oil retrieval process is valuable, unique and, unfortunately, underutilized. The image of the spiraling flame burning constant against the backdrop of a North Dakota or Montana field is practically a mascot for those pointing to what’s wrong with the oil and gas development because of the shale play. Although to some, there is a debate about why gas produced from a Bakken or Three Forks well is flared, this month’s feature outlines the real issues related to flaring, and the solutions being used to address those issues.

In addition to a major effort by both regulators and industry leaders to assess the most feasible regulatory solutions to flaring, technology providers and midstream operators are forcing their stories to be heard. From engineered flaring solutions that are drastically reducing emissions related to flared gas, to onsite compression units capable of stripping out valuable NGLs from well sites that may never be connected to a gathering line due to geographical topography or right-of-way delays, technology providers have moved past the experimental and product testing stage.

Their work reveals the incredible amount of time and investment that has been put into capturing Bakken gas. In the past five years, researchers, flare solutions providers and gathering companies have formulated a better understanding of the components and flow rates of a Williston Basin gas stream. The new insight, combined with proven technologies and a massive ramp-up in gathering-related infrastructure, has reframed the story of flaring. No longer is it dominated by a theme of waste, loss or economic insignificance. Flaring has evolved. Brian Cebull, president of a company formed specifically to address and reduce the practice, might have the most telling reason why the issue has changed. “We are proud to be a part of the solution,” he says. Cebull is not alone in that sentiment.

Although road construction seems to pale in comparison to flaring, the story, Historic Construction, shows how another major issue in the Bakken has been addressed. This fall, Knife River Corp. started work on the largest road construction project the firm has ever undertaken in North Dakota. The work will transform U.S. Highway 85, the main travel corridor that links service, storage and other oil and gas facilities to the oilpatch near Watford City, N.D. The problem with 85 is that it also runs right through Watford City. The Knife River team is alleviating a huge traffic problem in the city by building a bypass.

Lynn Westfall, director of energy markets for the U.S. Energy Information Agency, is also serving as problem solver. For the past year, his team worked to build a better shale oil production model. As Westfall explains, they wanted a better yardstick, one that could more accurately reflect production trends in the U.S. shale plays.

6

The BAKKEN MAGAZINE NOVEMBER 2013

ADVERTISER INDEX

www.THEBAKKEN.com VOLUME 1 ISSUE 8

4

EDITORIAL

Avitus Group

15

Bartlett & West

Editor Luke Geiver lgeiver@bbiinternational.com

13

BakkenJobs.com

Senior Editor Susanne Retka Schill sretkaschill@bbiinternational.com

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Frontier Precision, Inc.

Staff Writer Chris Hanson chanson@bbiinternational.com

36

Highland Projects LLC

Copy Editor Jan Tellmann jtellmann@bbiinternational.com

23

Hyatt House

26

International Road Dynamics Inc.

28

J-W Energy Company

PUBLISHING & SALES Chairman Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com President Tom Bryan tbryan@bbiinternational.com Vice President, Operations Matthew Spoor mspoor@bbiinternational.com

2

MBI Energy Services

35

Microtel Inn & Suites

27

Oaks Disposal Services LLC

3

Vice President of Content Tim Portz tportz@bbiinternational.com

Quality Mat Company

34 The Bakken Magazine 18 & 29

Business Development Manager Bob Brown bbrown@bbiinternational.com

The Bakken-Three Forks Shale Oil Innovation Conference & Expo 2014

Account Manager Tami Pearson tpearson@bbiinternational.com

19

Tri-Pac Engineering

Marketing Director John Nelson jnelson@bbiinternational.com

22

Wells Concrete

Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Advertising Coordinator Marla DeFoe mdefoe@bbiinternational.com

ART Art Director Jaci Satterlund jsatterlund@bbiinternational.com

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 © 2013

by BBI International TM

Please recycle this magazine and remove inserts or samples before recycling

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7

NORTH DAKOTA PETROLEUM COUNCIL

THE MESSAGE

YOUTH MOVEMENT: An incredible energy-related economy has vaulted North Dakota into the No. 1 spot for young adults to gain employment.

New Perspective "One thing is clear: A lot of people leave. No other state faces the [brain drain] problem to the degree that North Dakota does. There's nobody that's worse off than us."

This was the sentiment of Roger Johnson in 2003. Johnson, who served as the North Dakota Agriculture Commissioner at the time, was just one of many who lamented what seemed to be an irreversible trend: young North Dakotans leaving, never to return to the state. In fact, North Dakota was the only state between 2000 and 2003 to lose population, according to an article printed in USA Today in 2004.

8

But not anymore.

Today, North Dakota’s population is at the highest level it has ever been, thanks to a vibrant economy and tens of thousands of job openings.

These economic opportunities have helped North Dakota earn the top spot on MoneyRates. com’s list of Best States for Young Adults for the second year in a row. “A young adult starting out today would benefit from a place with plenty of opportunity, reasonable living costs and just enough lifestyle amenities to keep things interesting,” wrote Richard Barrington, a Senior Financial Analyst for the website. In fact, North Dakota even has the

The BAKKEN MAGAZINE NOVEMBER 2013

By Tessa Sandstrom

highest proportion of adults 18 to 24 than any other state, as many young people return home to North Dakota for jobs or to start their own businesses, while countless others migrate here for a fresh start.

Often, the energy industry and the high wages that come with it are credited for bringing many of these young people here. Many believe all of these jobs require hard labor and may be gone as quickly as they came.

This, however, is not true.

While there are many jobs that do entail working long hours in harsh conditions, many more are the long-term professional careers that so many young people once left the

state to pursue. These careers require education, training and skills in computers, math, science, economics, engineering, law, and the trades, among others. In addition, they are located statewide, from Williston to Fargo and Dickinson to Grand Forks and beyond.

In Grand Forks, engineering firms like AE2S and architecture firms like JLG Architects are growing and hiring as they work to meet the needs and demands of activity in the west. In Fargo, manufacturers like True North Steel and technology companies like Pedigree technologies have grown significantly as they develop the products and

NORTH DAKOTA PETROLEUM COUNCIL

software needed in the oil and gas industry. And, just as these companies provide products and services to the oil industry, countless others provide accounting, communications, legal, and other support to these growing businesses.

While many view these opportunities for growth as a good thing, there are some who ask, What about the quality of life? What about our changing towns?

Surely our rapid growth has come with its challenges, and all too often we become nostalgic for the way it used to be—when we knew nearly everyone we met walking down the street, and how we never had to wait in lines at the grocery store or to be seated at a restaurant.

Even I can admit I’ve become nostalgic when I return home to New Town and the outer edges of town seem more and more unfamiliar each time because of the rapid growth.

Yet, I was recently reminded by Lt. Gov. Drew Wrigley that it is all about perspective.

Wrigley was keynote speaker at the Lewis and Clark Fort Mandan Foundation’s Annual Dinner, and he spoke of the transformation we have seen in North Dakota over the past decade, and the nostalgia many feel when looking back.

“But,” he said, reminding us that we have come from decades of decline to a new era of prosperity, “You can’t have it both ways. There is nothing nostalgic about our small towns blowing away and our schools closing.”

Yes, we may not know

9.1%

STAY PUT IN ND

PERCENTAGE OF THE POPULATION AGE 20-24 UNEMPLOYMENT RATE FOR PEOPLE AGE 20-24

5.1%

$11,092 RENTAL $644 VACANCY RATE AVERAGE ANNUAL FOUR-YEAR COLLEGE COST

North Dakota has a higher population of people ages 18-24 than any other state.

MEDIAN RENTAL COST

SOURCE: MONEYRATES.COM

everyone we meet when we walk down the street, but we forget that for many years in some of our shrinking rural towns, we may not have even met a single person. Yes, we may have to wait in line in a grocery store or restaurant from time to time, but we forget that many grocery stores, restaurants, and other businesses were closing because there were far too few customers to even form a single line.

Today there are more people in these communities than ever before, and we’ve watched as communities large and small have grown, adding new restaurants, retail stores, and venues that will provide the amenities, entertainment and services for which so many young people once left North Dakota. One person working to provide those amentities is Marcus Jundt, an entrepreneur and one of the original investors of Caribou Coffee. Three years ago, he moved from Minneapolis to Williston, calling the small city “the most exciting place in America” outside of perhaps Silicon Valley. In an

interview on CNBC, Jundt said “I simply concluded this: I saw the greatest boom during my lifetime ... and I didn’t want to be 80 years old and look back at my life and say, ‘I missed the neatest thing that has ever occurred in my life.’”

Jundt compared oil development in western North Dakota to the California Gold Rush of 1849. Gold Rush “boomtowns” of that time, namely San Francisco, have since grown and evolved to become the cradle of America’s technological sector. With innovative young people and entrepreneurs entering the state, there is no reason to believe North Dakota cannot build the same kind of future if it so chooses.

The reversal in North Dakota’s population trends cannot be attributed to only one factor or one industry.

Rather, it is the result of a constantly growing and diversifying economy where each of our growing sectors— agriculture, energy, technology, manufacturing, etc.—rely on

and augment one another.

This has led to an era of entrepreneurialism that likely has not been seen in the state.

“There is so much energy, [and] there’s so much activity,” said Jundt. “This truly is an exciting place. ... Here, every industry is a growth business.”

This kind of excitement has attracted people from across America, and if we choose to harness it, we can make North Dakota a place where young people continue to want to live, work and raise their families.

And, if you don’t want to meet any more strangers walking down the street, stop and introduce yourself. It could be a young person who, given the opportunity, will become an active citizen and leader in the community, helping drive it and our state toward continued growth and an even better quality of life than we possibly could have imagined.

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

THEBAKKEN.COM

9

BAKKEN NEWS

BAKKEN NEWS & TRENDS

ND Gas Plant Capacity Processing Plant Capacity

Natura Gas Production *Forecast Case 1

0

2006

2008

2010

2011

2012

2013*

2014*

2015*

Million Cubic Feet Per Day

200 400 600 800 1,000 1,200 1,400 1,600

Look Out For LNG Number of Wells Per Month

New Gas Sales Wells Per Month

250

New Wells Selling Gas New Producing Wells

200 150 100 50

10

8/1/13

3/1/13

5/1/12

The BAKKEN MAGAZINE NOVEMBER 2013

10/1/12

7/1/11

12/1/11

2/1/11

9/1/10

4/1/10

6/1/09

11/1/09

1/1/09

8/1/08

3/1/08

5/1/07

10/1/07

7/1/06

12/1/06

2/1/06

9/1/05

4/1/05

0

Natural gas produced from the Bakken or Three Forks shale formations might never leave the Williston Basin.

In fact, it might be a critical component of future oil and gas retrieval. Multiple companies, acting alone or through joint ventures, are currently working to transform natural gas into liquefied natural gas (LNG) for use in highhorsepower engines, including pumping units, drilling rigs and trucks. Considering the numbers presented from a recent Bentek Energy Study on the U.S. natural gas markets

over the next decade, efforts to use shale gas to power highhorsepower operations makes sense. Over the next decade, natural gas demand in the U.S. will rise 27 percent, the study indicates. Supply will increase by 38 percent.

Shale formations such as the Williston Basin or some in Texas will contribute roughly 44 percent of the expected natural gas supply growth during that 10-year period. “These plays hold tremendous potential, and growth from these areas could exceed current expectations,� the report,

BAKKEN NEWS

Gas Movements LNG Exports

W West Canada East Canada

Pacific Northwest

X

Rockies

X

Midcon n Ma Market

Liquids-Rich Plays

Sou ou outhwest Southwest

Power, Exports to Mexico

Midcon dco Prod od du Producing

Northeast

Utica Marcellus Southeast

Texas

Mexico

LNG Exports, Power, Industrial Demand

SOURCE: BENTEK

adding that in the next 10 years, the U.S. will increase natural gas production to 9.1 billion cubic feet per day.

Stabilis Energy, a natural gas liquids (NGL) supplier, and Flint Hills Resources, a petroleum and biofuels refiner, have partnered to bring five liquefaction facilities to oilfields in regions that include Texas and North Dakota. Stabilis will build its first facility in Texas by early 2014. The joint venture is finalizing land procurement in North Dakota for facilities that could come online in 2015 or 2016. The Texas facility will feature a production capacity of 100,000 gallons per day. “We believe this venture will allow

Stabilis to rapidly deploy LNG liquifiers across all of the major oil and gas shale plays in North America,” said Casey Crenshaw, president and CEO of Stabilis Energy.

Through the joint venture agreement, Stabilis will provide LNG transportation, logistics and field services. The company is currently working with oilfield customers to plan dual fuel engine conversions.

Eagle LNG Partners, a consortium of Clean Energy Fuels Corp., Ferus Natural Gas Fuels, GE Ventures and GE Energy Financial Services, is also working to get into the LNG industry. Through Eagle LNG Partners, the consortium

is looking to develop, own and operate LNG production facilities that can supply fuel for long-haul trucking, rail, mining, marine and oil and gas services.

“Natural gas is revolutionizing the fueling of long-haul trucking and other high-horsepower applications,” according to John Shepard, managing director at GE Energy Financial Services.

“With massive amounts of domestic reserves, America is facing a generational opportunity to move to a more secure, less expensive and cleaner-burning fuel.”

The consortium is considering projects in North Dakota, Ohio, Texas, Florida, Washington and Colorado. Clean

Energy Fuels is experienced in developing, constructing and operating micro-LNG plants, and Ferus Natural Gas Fuels has expertise in cryogenic and micro-LNG plants along with cryogenic logistics.

Dick Brown, CEO of Ferus Natural Gas Fuels, said the company has learned from customers that LNG needs to be delivered to the point of consumption at a predictable price, with certainty and redundancy of availability.

“They want someone who has been in the business of owning and operating these plants, with the experience to facilitate the switch to natural gas, and who can deliver and dispense LNG safely and reliably without any disruption to operations.”

For natural gas producers, the price fluctuations of its product is nothing to worry about, according to the Bentek Energy study. “With a large amount of oil and NGLs in the production stream, producers can earn high rates of return regardless of gas price direction.”

THEBAKKEN.COM

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BAKKEN NEWS

Original Oil in Place Divide

17.7 bill.

Renville

Burke

Bottineau

0.2 bill.

17.0 bill.

1.6 bill.

Williams 28.9 bill.

Mountrail 28.9 bill.

McHenry

Ward

0.5 bill.

5.0 bill.

McKenzie 35.4 bill.

McLean

Expanding footprint in the core of the Bakken

3.6 bill.

Dunn Billings

20.1 bill.

0.09 bill.

0.1 bill.

Oliver

4.9 bill.

Golden Valley

Mercer 0.01 bill.

Stark

3.9 bill.

Slope

0.001 bill.

Morton 0.08 bill.

Grant

0.06 bill.

SOURCE: CRESTWOOD MIDSTREAM PARTNERS LP

Houston Firm Buys $750 M ‘core of the core’ Bakken Asset To purchase an asset in the core of the core of the Bakken shale play, Crestwood Midstream Partners had to spend $750 million. The investment landed the Houston-based unconventional shale midstream developer and asset manager a major crude oil, natural gas and water gathering system located on the Fort Berthold Indian Reservation.

The system includes more than 460 miles of gathering pipeline, which are the low pressure and flow pipelines that transport crude oil or natural gas from the production site (wellhead) to a central collection point. It features 150 miles of pipeline for crude oil, 160 miles for natural gas and 150 miles 12

for water. Bob Phillips, president and CEO of Crestwood, said the company’s main goal is to own assets in the core of the core of the best shale plays in the U.S. “If you look where our assets are [in the Bakken] we truly believe we are in the core of the core,” said Will Moore, senior vice president of strategy and corporate development. Earlier this year, Crestwood merged with Inergy LP, a move that added the Colt Hub in Epping, N.D., to the company’s list of Bakken assets. The Arrow facility is only 60 miles from the Colt facility.

According to Moore, the company performed extensive research in the area of the CColt and Arrow facilities to better understand the

The BAKKEN MAGAZINE NOVEMBER 2013

potential for future production. “I can tell you that actual [production] has outstripped every production estimate that we looked at,” Moore said.

The Colt Hub is a rail transportation facility that moves Bakken crude to the East and West Coasts. Crestwood believes it will now be able to leverage its Arrow asset to increase the value of the Colt facility, as the Arrow facility will help the company to gather more crude to ship out of the Colt Hub. According to Phillips, the Arrow facility was engineered with exceptional quality and current additions to the location are focused on compressor stations

and pumps, not pipelines. Current work will also help to connect 234 wells to gas gathering systems, which he says will reduce flaring in the region.

The $750 million purchase has made Crestwood one of the largest Bakken midstream service providers in the play as the company now services 18 percent of total Bakken crude production. But, for Phillips, the recent purchase is a core element of another goal for the company. “This helps us in our goal of becoming investment grade at some time in the near future,” he said.

BAKKEN NEWS

Bakken, Eagle Ford Make US World’s Top Energy Producer During an October meeting on flare reduction approaches suitable for the Bakken shale formation, Lynn Helms, director of the North Dakota Department of Mineral Resources, said the role of the Bakken in the world’s energy picture was an important point of discussion. One of the main talking points during that meeting, he said, was the reality that the Bakken is changing the

global energy landscape. The U.S. Energy Information Administration has proof that the Bakken is changing the world.

In 2013, the U.S. will be the world’s top producer of petroleum and natural gas hydrocarbons, according to the EIA, a spot that will move the U.S. ahead of both Russia and Saudi Arabia.

Credit the Bakken and Eagle Ford shales for the new ranking. Since

2008, petroleum production in the U.S. has risen by 7 quadrillion Btu, “with dramatic growth in Texas and North Dakota,” EIA said. Natural gas production has increased by 3 quadrillion Btu over the same period, but, both Russia and Saudi Arabia were only able to increase their combined hydrocarbon outputs by roughly 1 quadrillion Btu. Although in the past five

years, Russia and the U.S. produced nearly equal amounts of petroleum and natural gas hydrocarbon, 2013 has been a different story. This year, the U.S. will produce 5 quadrillion Btu more than Russia.

Crude Leak Contained, Soil Being Remediated A 20-year old pipeline running from Tioga, N.D., to Columbus, N.D., has drawn major attention following a leak that spilled more than 20,000 barrels of crude oil into a wheat field. The pipeline, operated

by Tesoro Logistics, has been temporarily shut down. Repairs are underway, crude has been contained and remediation is

underway, according to Tesoro.

The remediation efforts will cost Tesoro Logistics roughly $4 million.

There is some good news in the incident. “The release hasn’t impacted any surface waters, and Tesoro Logistics has been aggressive in containing crude oil,” said Kris Roberts, environmental geologist, divi-

sion of Water Quality, N.D. Department of Health. “I am very pleased with the company’s proactive response efforts.”

According to the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, the Tesoro spill equals the total for all spills in North Dakota over the past 10 years combined.

The spill is not a record breaker however, according to Roberts.

At press time, state regulators were still investigating the cause of the leak, but early indications show the leak was caused by corrosion. Officials were also determining when the leak was first noticed and when Tesoro was informed of the leak.

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13

BAKKEN NEWS

Bakken Weather A Serious Issue When oil production levels in the Williston Basin surpass 1 million barrels per day late this year or early next, it will be in spite of the weather. Although early to midfall is typically considered a high production time due to stable weather patterns in the region, this year has been an exception. In August, the Williston Basin surpassed 900,000 barrels of oil per day, but during the same month, the number of well completions fell from 251 to 130. The reason: bad weather.

During his monthly Director's Cut conference call, Lynn Helms, head of the North Dakota Department of Mineral Resources, explained that he was unsure why the well completion numbers dropped

14

so dramatically. Thanks to a call-in from a well completion staff member of a Bakkenbased firm, Helms was able to explain why well completions had dropped. According to Helms, the caller explained that a 2-inch rain in August had created extremely muddy conditions, stranding drilling rigs on well sites. The weather delayed the drilling schedule for several wells, which, in turn, delayed the completion of those wells.

And, many of the delayed wells were located on multi well pads.

For most operators, concerns for safety do not allow for completing a well while a drilling rig is on the well pad.

In addition to August delays, October rains will also slow production in the Williston

The BAKKEN MAGAZINE NOVEMBER 2013

WORTH TALKING ABOUT: Record spring rains and unusual weather patterns this fall created non typical operating conditions in the Williston Basin.

Basin, potentially stripping 10 percent of the working days for the year. McKenzie County was forced to shut down roads due to heavy rain. The shutdowns created a similar situation the play experienced in September, with drilling rigs stranded. Only a handful of saltwater disposal transportation operations were allowed to travel the roads during the shutdown.

Although there are currently 450 wells awaiting completion services as of October, the pace between completing wells and drilling new wells has leveled off Helms believes. And, this fall, up to 9 drilling rigs could be coming to the Bakken.

BAKKEN NEWS

Skilled Worker Openings, Supplier Launches Abound The Bakken is an equal opportunity employer. From well-head supplies to flexible hose to aviation, the oil and gas play continues to offer an attractive environment for company openings, regardless the scope or size of opening event or the company.

A two-week span in early October exemplifies that. Canary LLC, a comprehensive oilfield drilling and production service, opened the largest Bakken shale wellhead facility in Watford City, N.D. The 45,000-square-foot installation, the city’s largest to date, employs skilled workers for round-the-clock access to drilling and production services.

As special entertainment, former

NFL head coach Mike Ditka spoke at the opening, and David Garibaldi, a performance painter, who performed on a nationally televised talent show, painted at the event. Regional officials and company executives were also present.

FlexSteel Pipeline Technologies Inc., a Houston-based flexible pipeline provider, also held an opening for an 8,000-squarefoot facility in Killdeer, N.D., that is now housing inventory, installation equipment and technical field service staff members.

During an opening receptions, the company invited regional operators and potential clients to see the facility and visit with FlexSteel staff.

READY TO FLY: The Williston Jet Center, at the Williston (N.D.) Airport is one of several new air services in the region.

PHOTO: OVERLAND AERIAL PHOTOGRAPHY

Williston Jet Center, a joint venture company formed between Fargo Jet Center, Denver-based Ross Aviation and Overland Aviation, may not have held a large grand opening, but the company is now operating

out of Williston and is open, in part, to offer better access into and out of the region for Bakken operation teams.

THEBAKKEN.COM

15

PRODUCTS & TECHNOLOGY

AWARE OF THE

FLARE Evolving technologies are helping subdue the controversial process.

By Luke Geiver

Flaring is the most pressing issue and biggest challenge for regulators and operators in the Bakken shale. Flaring also presents the greatest opportunity. Roughly 1 million cubic feet of natural gas is produced per day in the Williston Basin. Of that, 70 percent is captured and sold. The remaining 30 percent is what compels regulators and industry officials to constantly craft flaring legislation, operators to install takeaway infrastructure or test new capturing technology, and local and national reporters to drive the region’s gravel roads photographing the tallest, brightest orange flare burning against the North Dakota skyline for a magazine cover or newspaper front page.

To date, the story on flaring has been documented many times. Flaring in the Bakken, as the story often goes, is all about wasting a resource and an industry more focused on the bottom line than on working to reduce the amount of flares that light up the Williston Basin night. But, due to a better understanding of Bakken gas in combination with the growing use of innovative technology to move, capture or compress Bakken gas, the story has evolved and there is now strong evidence that the 30 percent is heading toward a downward trend.

Issue in a Nutshell For the North Dakota Petroleum Council, flaring is its No. 1 priority. “There is a tremendous amount of national attention on it,” says Ron Ness, president of the NDPC. “It is a very hard issue to educate people about, you don’t just go out there and grab that gas flare,” he says. “There are a lot of components that go into capturing that gas flare. With oil you can go in and get it with a truck and truck it somewhere. You can’t do that with gas.”

BARELY THERE:The engineered flare solution developed

by Steffes Corp. reduces the amount of volatile organic compounds released into the air while reducing the color and size of the burn atop the flare stack.

PHOTO: STEFFES CORP.

16

The BAKKEN MAGAZINE NOVEMBER 2013

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TAKE TECHNOLOGY

DEVELOPED IN THE

BAKKEN AND EXPORT IT AROUND THE WORLD. – Ron Ness, NDPC LEARN MORE @ WWW.BAKKENOILCONFERENCE.COM 18

The BAKKEN MAGAZINE NOVEMBER 2013

PROVEN PRODUCT: The Steffes Corp. flare unit has been tested by Continental Resources Inc. and used on nearly 1,000 well sites.

PHOTO: STEFFES CORP.

Although natural gas prices are historically low, capturing that gas still presents an economic opportunity for operators and mineral rights owners. Bakken gas is unique. In 1,000 cubic feet of raw gas, anywhere from 8 to 12 gallons of natural gas liquids including ethane, propane, butane or natural gasoline could be present. Those products add value to the gas stream in addition to its value as a product capable of providing power or heat. Some companies have already proposed facilities to process only one of those NGLs such as butane or ethane.

But as Ness says, capturing gas is a complex process linked in large part to the presence of infrastructure. The unique qualities and value of the gas makes the notion that flaring occurs because capturing is uneconomical untrue.

Justin Kringstad, director of the North Dakota Pipeline Authority, an agency started in 2007 by North Dakota to increase the amount of pipelines present in the state capable of moving energy-related products, also believes there is a misconception about flared gas in the Williston Basin. Between 2011 and 2012, the amount of pipeline installed in North Dakota could span the distance from Seattle to Washington, D.C, twice. Not all of the pipelines installed were linked to natural gas gathering lines, but according to Kringstad, there is a huge push to gather more gas regardless of the gas price.

There are two main challenges to capturing the gas produced in the Williston Basin that occurs during crude retrieval. Both are

PRODUCTS & TECHNOLOGY

linked to local gathering, having nothing to do with any large interstate pipeline. First, Kringstad says, flaring occurs because of the inability of remote well sites to be connected to a gathering Cebull Kringstad line due to difficult topography or right-of-way issues. Second, flaring occurs on well sites that are already connected to gathering lines because some pipelines are simply not adequate to move Mayer Ness the volume of gas that might be produced on a well site today versus three years ago.

“Well sites are better today,” Kringstad says, “and pipelines put in the ground a few years ago may have been undersized.” Ness points to the trend in multiwell pads as a major factor in why existing pipelines may be undersized. “A lot of the infrastructure was built for one

THEBAKKEN.COM

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PRODUCTS & TECHNOLOGY

SERVICED: The Gtuit team provides servicing and transportation for all units.

PHOTO: GTUIT

COMMITTED: Mark Peterson, Gtuit chief operating officer stands near a unit on a Bakken well site.

PHOTO: GTUIT

to two wells per 1,280 acre spacing unit. Now, all of a sudden, the technology has improved and we are looking at 4, 8 or 12 more wells in that 1,280.” Most gas lines are installed to handle a set volume and pressure from a set 20

amount of flares. The addition of new wells to a spacing unit creates more gas volume and more pressure. In many cases, infrastructure installed in the past isn’t equipped to handle new gas volumes. And, operators

The BAKKEN MAGAZINE NOVEMBER 2013

and industry regulators are just now beginning to understand the flow rates and qualities of Bakken and Three Forks shale gas streams.

From the time a well begins producing crude and associated gas, an operator has one year to flare a certain amount of gas before it is required to capture the flare gas, unless it is determined there are circumstances that inhibit an operator from doing so. A recent lawsuit was issued by a group of mineral owners against a group of operators seeking reimbursement for flared gas produced during and after that one-year period. In the lawsuit, the plaintiffs argue that operators are flaring in excess during the first year, and continue flaring after the first year allowance has expired. The lawyers representing the plaintiffs point out that flaring is also taking place although infrastructure is already in place. The status of the lawsuit is still undetermined, but it does highlight the misunderstandings that exist regarding flaring.

“Infrastructure isn’t right-sized,” Ness says, “so that is a big challenge in and of itself. If an operator was going to get its gas as soon as it could, which everybody wanted to do, the operator didn’t build its lines big enough. We have to look at that part of this [flaring] puzzle.”

For both Ness and Kringstad, the answer to flare reduction starts with more in-

PRODUCTS & TECHNOLOGY

THE VALUE: Natural gas liquids present in the gas streams are stripped out, stored and transported for use at processing facilities.

PHOTO: GTUIT

frastructure and compression capabilities.

There are currently 18 facilities in the state capable of taking in and processing the associated Bakken or Three Forks shale gas, with more on the way, including a Hess Corp. operated facility that will practically be a refinery, Ness says. But, adding infrastructure takes time, although, since 2007, gas plant capacity has increased 340 percent from 227 million to more than 1 billion cubic feet per day.

The fluctuations between the number of new wells coming online per month, versus those being connected to gathering lines is also a constant concern, Kringstad says. Those fluctuations are stabilizing. Until the Bakken and Three Forks shale plays are right-sized to capture 80 to 90 percent of the flaring instead of 70 percent, there are alternatives, however, both in the field and in the boardrooms that are now revealing how flaring in the Bakken is an opportunity in disguise.

Onsite Answer The NDPC, along with other industry members, has formed a flaring task force whose goal is to identify solutions for better optimization of the resource at the actual well head and find ways to improve existing

infrastructure. The task force consists of government agencies, the Three Affiliated Tribes, researchers, landowners and key industry partners.

Innovative technologies being used in the oilpatch are already reducing the amount of flared gas or cleaning up the gas that is emitted. Many of those technologies are not dependent on new pipeline installation or gas processing facilities.

Gtuit, a Billings, Mont.-based flare solutions provider, is using a small-scale technology to create massive results. The company offers a mobile compression and refrigeration set-up that connects directly to the wellhead. According to Brian Cebull, president of Gtuit, a single unit operating for one year on a well site prevents 3,856 tons of volatile organic compound emissions, 11,500 tons of C02 emissions and captures enough Btus to provide heat for 6,087 homes, numbers Cebull cites from actual testing performed in the Williston Basin. “Our solution addresses those wells that are stranded and may be permanently stranded due to right-of-way issues or topography issues,” Cebull says.

The company currently operates 18 systems. The systems strip out the NGL’s from the gas stream and refrigerate them for storage and transport. Units can be combined

and scaled up to handle high volumes of gas, an element of the technology Cebull emphasizes for good reason. “There are lots of folks that are coming up with new technologies now,” Ness says. “The key is to find some that are effective onsite. You want to be able to build scale, to be able to build multiple units in the field rather than a handful here or there.”

The ability of the Gtuit system to strip out the NGL’s provides operators with an attractive economic incentive. Cebull says the value of the NGL’s more than offsets the cost of service. The company designs and builds its own equipment, an aspect that wasn’t always the case. “We went into this purchasing off-the-shelf equipment and discovered quickly that off-the-shelf equipment was not designed for 1,500 to 1,600 Btu gas,” Cebull says. “Our basic system is actually built and rated for rich Bakken gas.”

The systems are brought to and removed from a well site by Cebull’s team and are serviced by Gtuit. “We are not there to compete with the pipelines. We are there to be there on day one, strip the NGLs until the pipeline shows up, then move on to the next well,” Cebull says. The company currently has contracts with the Bakken’s No. 1 leaseholder, Continental Resources.

THEBAKKEN.COM

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PRODUCTS & TECHNOLOGY

Number of Wells

ND Wells Flaring Wells Connected in 2013

1000 900 800 700 600 500 400 300 200 100 0

2008

2009

2010

2011

2012

2013*

Year the Well Began Production

*Data through August 2013

Wells Still Flaring SOURCE: NORTH DAKOTA PIPELINE AUTHORITY

Gtuit is also working with power companies to analyze the methane left over in the gas stream after the NGL’s are stripped out, and it has taken requests to consider using the gas to run the artificial lifts on the well sites.

The stripped-out gas stream is also perfect for liquefied natural gas or compressed natural gas for use in bifuel applications or diesel replacement streams.

Gtuit is expanding, Cebull says, because its clients are seeing the value in its systems.

“Our goal is to be the best in the world for

22

treating raw wellhead gas,” he says. Cebull does have competition. Several companies, including Bakken Western Services LLC, also provides a flare reduction technology capable of stripping out NGLs. Blaise Energy Inc. provides a technology that converts associated gas into propane for use in transportation or heat. According to Ness and Kringstad, companies from around the world are coming to the Bakken to provide technology for flare reduction.

Steffes Corp., a Dickinson, N.D.-based

The BAKKEN MAGAZINE NOVEMBER 2013

steel fabricator that has grown significantly since the Bakken shale play ramped up in 2007, has also entered the flare gas solution industry. The company has designed an engineered flare that helps to drastically reduce the amount of volatile organic compounds emitted at the well site.

Todd Mayer, new business development manager and a recognized guru of flaring solutions, says the Steffes approach to flaring is based on the extreme flow ranges of gas that occurs in most Bakken or Three Forks wells.

PRODUCTS & TECHNOLOGY

In any given day, gas production can range from 1 million to zero cubic feet per day, he says. “It is well documented that wells might flow in the first week or so at 1 million cubic feet per day and then fall quickly to one-tenth of that. You need devices that are able to handle these wide ranges of flow and burn efficiently over wide ranges,” he says.

Not only does a Bakken or Three Forks well site present an operator with a wide flow range for gas production, it also produces two types of gas: the produced gas that is high-pressure and ready for a pipeline, and the low-pressure gas present in the oil tanks.

“Our customers wanted to know if we could design a system to be a combination system, one that could take on both gas streams,” Mayer says.

The engineered flare system Mayer and his team spent over a year designing can handle both gas streams, and turns that bright orange flare into a thing of the past. The system features a high-pressure tip, a low-pressure tip and a pilot light. To get a cleaner burning flare, the system relies on air mixed with the gas stream. “When you start to see smoke, we just don’t have enough air mixed in the gas,” he says.

The high-pressure flare tip is connected to the separator that disperses the gas and oil.

The high-pressure flare tip features a stainless

steel casying on top of a 6-inch pipe. When the gas pressure builds up in the pipe after being sent over from the separator, the pressure raises that stainless steel casting. The gas then leaks out the crack created between the pipe head and the casting and then hugs the outside of the casting, moving vertically, not horizontally, Mayer says. “It’s like an airplane wing, it [gas] wants to hug that curved radius on that casting.” As it hugs the casting, the gas stream gathers velocity and, more importantly, air.

The design accomplishes two things.

The movable casting can accommodate a high range of high-pressure gas flows. Sometimes the crack will be barely there, other times it will by one-eighth of an inch open for gas flow. And, because of the curved casting design that forces the gas stream upward, the resulting flare that is produced burns cleaner and nearly translucent due to the addition of air to the gas stream. “There is no computer that is controlling it. It is weight and pressure that moves it [casting],” Mayer says.

Although the design is simple, it offers operators a robust option to reduce the amount of emissions created during flaring.

Since first unveiling the product almost three years ago, the company has sold nearly 1,000 units. “It is much larger and more popular than we ever thought it would be,” he says.

Steffes is continually working to perfect the system. A team will train well site service teams how to install the system and most systems are checked monthly, although many don’t need a check. The units are designed for one to two well pads, but Mayer and his team are working on units that are designed for multi-well pads. “Having a larger flare option available is crucial,” he says. For the low-pressure gas streams that do not create enough pressure to lift off that stainless steel casting, the company has developed a low-pressure air-assist option that includes a battery operated fan to inject air into the stream, creating a cleaner burning flare.

Mayer says his customers are happy with his system, but he is constantly working to tweak the design. Cebull is doing the same with his team on the Gtuit system, and they share a sentiment that helps to illuminate why a new chapter in the Williston Basin’s story on flaring has begun. “We are proud,” Cebull says, “to be a part of the comprehensive solution to address natural gas flaring in N.D.” Author: Luke Geiver Managing Editor, The Bakken magazine lgeiver@bbiinternational.com 701-738-4944

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24

The BAKKEN MAGAZINE NOVEMBER 2013

INFRASTRUCTURE & CONSTRUCTION

Leveraging the

Energy Culture Why North Dakota and Norway could become an energy superpower

By Luke Geiver

During the last week of September, a group of people emerged from a tour bus and scattered out along a gravel road running next to a Bakken well pad. The group

had stopped to watch a hydraulic fracturing crew working at the well. Among those standing on the road were several key members of a Norwegian energy delegation sent to the region to learn about the Bakken. Like most tours of the region, the group was there to visually experience the oil patch, but during and after the trip, it became clear that the delegation would leave the Williston Basin with an understanding of the play that could make Norway and North Dakota an oil producing joint venture superpower.

An Unconventional Education The energy delegation represented a wide range of endeavor, including academia, industry and government. Arne Graue, the head of the Petroleum and Process Technology Research Group, professor of physics at the University of Bergen, visiting scientist at MIT and chairman of the board of the Petroleum Research School of Norway, which represents all Norway universities, headlined the academic members.

During the week-long trip that included stops in the North Dakota communities of Fargo, Grand Forks, Minot, Watford City and Bismarck, Graue made his presence known. Graue signed a memorandum of understanding (MOU) between the Petroleum Research School of Norway and the University of North Dakota that will provide a student and professor exchange opportunity for both to learn about different aspects of how each approaches, utilizes and retrieves

THE DELEGATION: The energy tour included stops at well sites, frack sand terminals, workforce housing facilities, a gasification plant and several other oilpatch-related locations.

PHOTO: GREAT PLAINS INSTITUTE

THEBAKKEN.COM

25

INFRASTRUCTURE & CONSTRUCTION

CORE PRIVLEDGE: Steve Benson (far left), chairman of the University of North Dakota's College of Engineering & Mines Petroleum Engineering department, explains the core library located on the UND campus.

PHOTO: GREAT PLAINS INSTITUTE

energy. “We are considering many of the challenges associated with oil and gas production in the Bakken field in relation to the Norwegian continental shelf where we have 40 years of experience,” Graue says.

In the early 1960s, oil was discovered off the coast of Norway. Since then, the country with a population of roughly 5 million has moved into the top 10 in world oil production rankings. Norway is ranked in the top three in natural gas production, and, at roughly $800 billion, it has the world’s largest sovereign wealth fund. Norway, like every other country in the world except the U.S., treats its underground minerals and resources as property of the country, not the landowner. Although Norway's oil development mainly takes place offshore, the country has still gone through the same rapid development issues, extreme increase in regional energy production, and although North Dakota’s Legacy Fund pales in comparison, an incredible growth rate in country income due to oil and gas.

Even though the country does not perform hydraulic fracturing, Graue and others on the trip shared the same view on the role of the Bakken in relation to Nor26

The BAKKEN MAGAZINE NOVEMBER 2013

INFRASTRUCTURE & CONSTRUCTION

NEW SUBSTANCE: A popular stop on the tour was a STANDING ON THE FUTURE: Learning about the advancements used for unconventional crude oil retrieval was one of the hydraulic fracturing operation underway on a well site. In key goals of the energy delegation's members.

PHOTO: GREAT PLAINS INSTITUTE Norway, the practice is not used.

PHOTO: GREAT PLAINS INSTITUTE

way. “Unconventional oil and gas production is very important. We are looking for ideas that are useful in North Dakota that could be useful in Norway’s energy production,” Graue says.

Of particular interest to Graue is work being done in North Dakota to better understand enhanced oil recovery and the use of CO2 to do so. “In Norway, with such a harsh environment, it turns out infrastructure offshore is limited. If we don’t come up with technology to increase oil recovery in the next 15 years, the remaining oil does not justify the construction of any new infrastructure,” Graue says. “In North Dakota, you have the opportunity to do the right thing in order to maximize the oil resources. I think the approach and the most important things to do early on, from our perspective, is to focus heavily on research and development, that is what we see,” he says.

Brad Crabtree, policy director for fossil fuels at the Great Plains Institute, a nonprofit think tank and organization devoted to fostering better energy use in the Great Plains, also believes research and development can only help the Bakken shale play.

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Crabtree was largely responsible for making the energy delegation tour happen. In 2011, following Statoil’s (the Norwegianrun exploration and production giant ) acquisition of a major asset base in the Williston Basin, Crabtree began exploring the opportunity he believed was present for North Dakota and Norway. “Statoil’s acquisition was that company’s global effort to move into unconventionals in a big way,” he says. Now, it is an area where North Dakota and Norway can be true world leaders in the systematic deployment of new technology, he adds.

To make that happen, Crabtree made sure that after a North Dakota delegation visited Norway a year ago, that a Norwegian delegation would visit the Bakken. “Our hope and goal with this was to have people in industry, government and research talking and exchanging information, but also forming real partnerships.”

To help foster a greater relationship and continued partnership, Jostein Mykletum, the Consul General of Norway, a position he maintains, in part, out of Houston, was on the tour. “I’m the link between the petroleum industry and Norway,” he says.

Because the state is a major player in the global energy mix, he says, Mykletum wanted to see the Bakken, including technologies used related to drilling and water handling. The goal following the trip is to transfer back to his counterparts in Houston and Norway what he learned, he says. “We are here to interlink our technology with the technology here.”

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THE REALITY: In addition to research efforts underway at North Dakota universities, the energy delegation also wanted to see firsthand the logistical issues of the Williston Basin.

PHOTO: GREAT PLAINS INSTITUTE

Trip Takeaways In addition to the signed MOU between UND and Norway, Crabtree says the tour attendees left enthused and fired up.

“They were genuinely impressed with the innovation and entrepreneurial attitude that they saw,” Crabtree says. Most of the tour attendees were surprised to see that the oil development in the region had created less of a footprint than they had read about in media publications. All of the attendees believed the state needed to work more to address flaring. Following a visit to Bismarck State College, the group was interested in providing Norwegian students with online classes run by BSC. North Dakota delegates who met with the tour attendees were interested in how Norway handles its sovereign fund and what North Dakota could do to have similar success, Mykeltum says.

Visits to workforce housing facilities, well sites, gas plants and rail loading facilities were also popular amongst the group, Crabtree says. “They wanted to experience it all. They have had that experience of oil booms so they were interested to see how we were managing the boom.”

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29

MAKING IT

JUST THE START: The transformation of U.S. Highway 85 and the traffic congestion in Watford City, N.D., has begun. Material is being brought in for use this winter and next spring.

PHOTO: ERIC JENSEN, MDU RESOURCES

Historic Construction

By The Bakken magazine staff

In Watford City, N.D., road construction is not frowned upon. In fact, it’s celebrated. Thanks to Knife River Corp., a construction firm subsidiary of MDU Resources, the Bakken’s hub city has much to celebrate. This fall, Knife River started a bypass reroute project that will alleviate passage of nearly 3,700 trucks through the heart of the city every day. For Knife River, the bypass represents the largest road construction project the company has ever undertaken in the state. For those who have never traveled the existing roadway, imagine driving through your favorite small town in a traffic jam 30

of semis. The long line of traffic rumbles through the area for the majority of the day, seven days a week.

The U.S. 85 Watford City Bypass project will reroute Highway 85 traffic onto a new roadway southwest of Watford City. The overall goal is to enhance safety and traffic movement through the area, whose congestion is widely recognized as an unfortunate byproduct of oil development in the region. The completed project will span 9 miles. Knife River will build 7.5 miles of new, four-lane roadway and is also working on a 1.5 mile tie-in with existing roadway.

The BAKKEN MAGAZINE NOVEMBER 2013

“We’re excited to be involved in this project for a couple of important reasons,” says Tony Spilde, senior public relations representative for Knife River.

“First, it’s great to be on the team that is making Highway 85—and Watford City’s main street—safer.

This is a significant step forward for safety on the Highway 85 corridor. Second, a project of this magnitude is instrumental in putting a lot of people to work. It’s the largest construction project Knife River has ever had in North Dakota.”

Construction began on Sept. 30 on the north end of the project. The goal, Spilde says, is

to get more than half of the mass grading done this year. The team has already moved more than 200,000 cubic yards of material, bringing the road up to grade.

The team has also begun installing a box culvert and other drainage conduit.

Although Knife River has major capabilities and resources to complete the project on time, there are challenges, Spilde says.

“Rain has already caused a few stoppages, but it’s still early and we’re definitely still on track,” he says. When winter does hit, the team will stop all earth work and begin hauling base rock to the project site. The plan is to

MAKING IT

THE PROBLEM: Oilpatch traffic has limited alternatives to U.S. Highway 85, the same highway that runs directly through Watford City, N.D. PHOTO: ERIC JENSEN, MDU RESOURCES

LINKING IT UP: Dirtwork has begun, but work is still underway to ensure the bypass will not conflict with electrical lines or underground pipe.

PHOTO: ERIC JENSEN, MDU RESOURCES

bring in 250,000 tons of base rock in through December. Some will be placed and some will be stockpiled. As soon as possible in the spring, the team will resume grading work and bring in another 250,000 tons of base rock for the southern portion of the bypass.

Concrete paving work will take place next year on the southern tie-in, amounting to roughly 27,000 cubic yards of concrete.

In August, mainline paving will begin and 196,000 tons of asphalt will be paved on the new route.

“We expect the bypass to open by

the end of October 2014,” Spilde says.

In addition to weather battles, the Knife River team is dealing with scheduling coordination. The team has to coordinate with eight different utility companies that need to relocate their pipelines or power lines.

“These are good companies that have been great to work with, but it’s quite an undertaking to line up everyone’s schedule. We’re making good progress on that and don’t foresee any major issues,” he says.

TALL ISSUE: One of the main challenges to building the bypass is aligning the schedule of utilities and sewer companies that need to help Knife River Corp. move existing infrastructure to make the new roadway possible.

PHOTO: ERIC JENSEN, MDU RESOURCES

THEBAKKEN.COM

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IN PLAY

The New Equation October 2013 935 Mbbl/d

November 2013

Production decrease from previous month

86 + 60 = 26 THOUSAND BARRELS/DAY

PRODUCTION FROM

NEW WELLS

THOUSAND BARRELS/DAY

PRODUCTION FROM

LEGACY WELLS

961 Mbbl/d

THOUSAND BARRELS/DAY

OCTOBER-NOVEMBER

NET CHANGE

The EIA's new data illustrates production data from new wells and legacy wells. Adding both together provides a monthly production number. As the equation above shows, a high percentage of new well production goes toward replacing the amount of production loss that occurs in legacy wells.

Shale Production Reporting’s New Era

By The Bakken Magazine Staff

A new oil production yardstick has replaced the old yardstick that Lynn Westfall, director of the U.S. Energy Information Administration, says just wasn’t useful anymore. The Drilling Productivity Report, developed by Westfall and his team over the past year, more accurately reflects current U.S. oil production during the month of the report’s release, and for roughly the two months after the release. The main driver 32

behind the report is the energy production linked to U.S. shale plays. “How all of this came about was the change in oil production,” Westfall says. In the past, production was measured by drilling rig counts. Because one rig would create one well at a time and that well would provide a long, stable production curve, tracking production was as simple as tracking the rise or fall of drilling rigs in a given region. “If rig count was going up, they knew production in a certain area was going up, and if a

The BAKKEN MAGAZINE NOVEMBER 2013

rig count was going down, vice versa,” he says.

But, using rig count as a production assessment tool is virtually obsolete for shale plays.

“Two years ago, people started noticing that production in shale plays was going up, but rig counts were going down,” Westfall says. To help trackers more accurately understand shale production, the EIA team combined several metrics to form an assessment model. The metrics include new wells per drilling rig, initial production rates on new

wells, decline rates on new wells, time duration related to drilling and several other factors.

“This is very exciting, not only intellectually, but I think it is providing some very useful data to the industry,” he says.

The reports focus on six major areas in the U.S., including: Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, and the Permian shale. The Bakken shale play production rates are known for being high the first month of production and steeply declining after that, the impact of which

IN PLAY

New-well oil production per rig is now tracked in the EIA’s monthly production data. “One of the things that surprised us as we got into it was how many new wells you have to have just to stay even with the decline. If you looked at our data from the Bakken, for instance, and do the math, it shows that for every 100 barrels you produce from new Bakken wells, 70 barrels of that go just to replace the decline from old wells,” he says.

The numbers are not cause for alarm however. According to Westfall, the EIA’s new data modeling shows a positive trend for many shale plays, specifically the Bakken. Typically, oil production in the early life of a shale play is linked to the amount of steel in the ground, but now in the Bakken, production isn’t linked as strongly to steel in the ground. Most production increases are now a result of more productive wells.

As Westfall says, production is rising because operators have a better understanding of hydraulic fracturing and horizontal drilling. “They are learning more about these new fields."

Going by the production numbers for the Bakken since 2009, Westfall is right. In October 2009, the North Dakota Department of Mineral Resources reported there were 56 active drilling rigs and daily production for the month was roughly 240,000 barrels of oil per day. In October 2010, the DMR reported 154 active drilling rigs and a daily production of nearly 344,000 barrels of

Barrels/day 0

100

200

300

400

500

600

2007 2008 2009 2010 2011 2012 2013 Rig count

0

50

100

150

200

250

SOURCE: EIA

oil. In October 2011, the active drilling rig count was 198 and daily production for the month reached 490,376 barrels of oil per day. As of October 2013, 182 drilling rigs are active and production on a daily basis for the month reached 911,496 barrels of oil per day. (The all-time high for drilling rigs was in May 2012, when the DMR reported 218 drilling rigs).

Overall, the main goal for the modeling is to show the combined effects of new-well production in accordance with changes in legacy production,

because, as the EIA says, total new-well production is offset by the anticipated change in legacy production. Although the modeling takes into accounts several factors to show a production trend in a region, it does not take into account infrastructure constraints, bad weather or shutins due to economic or environmental issues. In certain cases, the EIA also had to assemble estimations for well production due to the time delay present in some state production reporting. North Dakota is very good about providing data in a

timely manner, he says, but other states are as much as four to six months behind with their data.

“Data that is four to six months old doesn’t really do much,” he says.

The drilling production reports will be issued every month.

The first-ever report showed that two regions in the U.S. account for 75 percent of current monthly oil production growth, the Bakken and the Eagle Ford.

Over the past year, the EIA reports, production in the regions increased by 700,000 barrels of oil per day.

THEBAKKEN.COM

33

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The BAKKEN MAGAZINE NOVEMBER 2013

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FIELD CONSTRUCTION Highland Projects is extremely proud of the reputation we have built in our facility construction and maintenance division. Whether the facility is a single well tie-in or a large plant expansion we have the highly skilled individuals ready to provide you with the utmost quality service and workmanship eager to meet your standards of efficiency and integrity. Our safety program and quality control personnel provide our customers a level of safety and quality that is unmatched in the industry.

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FIELD CONSTRUCTION INCLUDING: (installation, commissioning, repair and maintenance of natural gas compressors) r Complete B31.3 process piping, fabrication, alteration and repair r Oil batteries r Oil and gas satellites r Multi well pad installation r B31/1 boiler external piping r Metering stations

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