COLUMN-Welcome to Mountrail, North Dakota: John Kemp

Tue Nov 6, 2012 2:11pm GMT

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By John Kemp

LONDON Nov 6 (Reuters) - Some analysts still question the transformative impact of hydraulic fracturing and horizontal drilling on the oil industry. Doubters should pay a visit to Mountrail County, North Dakota.

Running little more than 40 miles from East to West, and 50 miles from North to South, with a population of 7,673, according to the North Dakota Association of Counties, Mountrail is at the epicenter of the largest drilling boom in the world. Mountrail has done more than any other place to remake the oil industry in the last decade.

Mountrail's story shows just how much oil can be wrung from a tiny scrap of earth with new technology. In August 2012, the county's 1,342 active oil wells produced more than 6 million barrels of crude, 195,000 barrels per day (bpd), up from just 734 bpd a decade ago, according to North Dakota's Department of Mineral Resources.

Output has grown more than a third in the last 12 months, from 144,000 bpd in August 2011. The number of producing wells is up by nearly 40 percent, from 964. Twenty-seven drilling rigs active in the country, punching yet more holes into the earth, according to state filings, on behalf of exploration and production companies as diverse as Hess, Whiting Oil and Gas and Marathon.

North Dakota's output has overtaken Ecuador, causing some observers to suggest that the state should be admitted as the newest member of OPEC. Oil wells have been sunk into the Bakken formation across the western third of the state (as well as eastern Montana). But Mountrail accounts for more than 1 in every 4 barrels of crude produced in North Dakota.

Together with equally modest neighboring counties of McKenzie (population 6,360; area 2,861 square miles), Williams (population 22,398; 2,148 square miles) and Dunn (population 3,536, 2,082 square miles) these four counties, covering an area of roughly 100 miles by 100 miles, accounted for over 80 percent of state oil production, almost 600,000 bpd.

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North Dakota counties:

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Bakken oil output study:

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PERMEABILITY IS EVERYTHING

Wells drilled into the Bakken are tremendously variable: "The Elm Coulee Field in Montana and the Parshall and Sanish Fields of Mountrail County, North Dakota, being the most prolific examples of Bakken success; however, many Bakken wells have yielded disappointing results," according to the Energy and Environmental Research Center (EERC) of the University of North Dakota.

"Although variable productivity within a play is nothing unusual to the petroleum industry, the Bakken play is noteworthy because of the wide variety of approaches and technologies that have been applied with apparently inconsistent and all-too-often under achieving results," EERC wrote in a study for the U.S. Department of Energy ("Evaluation of key factors affecting successful oil production in the Bakken formation" May 2010).

"Inconsistency is not unusual ... (but) the deep and tight nature of the Bakken formation makes it a very expensive target for exploration and production." Mistakes are costly.

Even within Mountrail, there have been enormous variations in well productivity. Average cumulative production during the first six months for new wells sunk in Dunn county, West Mountrail and East Mountrail was 25,000 barrels, 74,000 barrels and 90,000 barrels respectively. The average difference between the highest-producing and lowest-producing wells in prolific East Mountrail was 135,000 barrels over six months.

EERC analyzed a variety of factors affecting well output. But among the most important was the thickness of the shale formation and its total organic content (TOC), which not only mean there are more hydrocarbons in place but appear to contribute to greater underground pressure and natural pressure-related fracturing in the rock.

"Permeability is the most important geological characteristic of a formation with respect to hydrocarbon production," EERC explained. "Simply put, without adequate permeability, any oil in place, regardless of how vast the resource is, cannot flow to the well. The primary permeability (or matrix permeability) is typically very low, so the presence of natural fracturing in the Bakken is a factor that is critical to oil production."

Large amounts of organic content seem to have contributed to a significant build up of pressure as the hydrocarbons thermally matured (cooked) underground, creating a natural network of cracks in the formation even before the hydrofracking teams arrived.

"Strata associated with thick, mature shales typically have more fractures than reservoir rocks associated with thin mature shales," EERC found.

In addition, production is much higher near natural breaks in the underground formations. All the most productive wells in Dunn county have been drilled close to the Heart River Fault. In Mountrail, all the most productive wells have been located east of the Nesson Anticline.

"Identifying naturally fractured areas within the Bakken has proved to be very important because permeability as a result of natural fracturing is a factor critical in successful oil production," according to the EERC report.

"The Bakken shale... is a highly technical play that requires an understanding of geology, completion engineering and practices that can unlock tightly held hydrocarbons within the formation.

"Successful development of hydrocarbon production from shale is highly site-specific."

INTELLIGENT FRACKING

Careful selection of drilling targets is essential because depth and high pressure put the cost of drilling and completing a well into the Bakken at more than $8 million, according to consultants Bentek.

Understanding the local geology appears to have been the single most important determinant of productivity and well success.

Geological factors account for more production variability than how long the horizontal section of the well is, how many horizontal stages are drilled from the same hole, whether they are fracked once or in multiple stages, and how many fracturing stages are done in total.

Little wonder that oilfield services company Schlumberger has touted its technology, including seismic surveying and visualization, to call for a more intelligent approach to fracking, criticizing the old brute force drill-and-hope approach, with its over-use of pressure, too many unproductive well stages being fracked and wells being drilled in marginal areas.

The technology to extract oil from shale formations is still in its infancy, as my colleague Robert Campbell explained in a recent column ("Shale is dumb but booming. What if it gets smart?" Oct 26).

Skeptics argue the conditions which have made fracking so successful in the United States cannot be replicated elsewhere; the technology will have only a modest impact on global oil production in the decade ahead.

Mountrail illustrates just how much oil can be unlocked from shale formations. They may not be as productive as Saudi Arabia's legendary super-giant field Ghawar, but the production potential is nonetheless enormous.

Mountrail and the three counties to the south and east occupy a tiny land area but now produce as much oil as a small OPEC country. By definition there must be many other plays with similar potential around the world given the wide distribution of shale resources.

Mountrail shows how much further the technology could be pushed in the coming years to improve well yields, while cutting the amount of poorly targeted drilling and cutting the impact on local communities and the environment.

Too many analysts still dismiss shale as a high cost form of oil, with only a marginal future, assuming the cost structure is fixed. But as the uneven exploitation of shale across Mountrail and the rest of North Dakota shows, the technology's full transformative impact is only just beginning.

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