Exhibiting the Bakken's Mood

For three days, experts, producers and decision makers offered valuable perspective on the state of the Bakken at the Bakken Conference & Expo. The following is a recap.
By Patrick C. Miller | September 18, 2015

If there was one word used the most by presenters during the three-day Bakken Conference & Expo at the Alerus Center in Grand Forks July 25-27, it was probably efficiency. From drilling to fracking to transportation to the processes used to run daily operations, there was information—and the data to back it up—on how to lower costs by being more efficient in the Bakken.

Nearly 550 attendees and 87 exhibitors took part in the three-day event that began with a special session on infrastructure called “The Bakken’s Backbone,” which focused on infrastructure issues important to the Bakken, including: rail, pipeline, water, gas processing, fleet transportation, power and commercial construction. During the two days that followed, presenters and panels were included that ranged from how national energy policy impacts Bakken production to which type of proppant works best to increase production efficiency.

The Bakken’s Backbone
Watford City mayor Brent Sanford delivered the keynote address during the first day’s infrastructure seminar. He outlined a brief history of the city’s growth, noting that its has a strategic importance through community expansion. From 2010 to 2015, Watford City has borrowed more than $300 million for projects that include a $54 million high school; a $92 million community events center; a $30 million wastewater plant; a $27 million special improvements district; a $58 million hospital and clinic; a $50 million county law enforcement center; a $10 million apartment complex; and a $5 million day care center.

Dean Bangsund, research scientist with North Dakota State University’s agribusiness and applied economics department, provided information on the Bakken’s economic impact on North Dakota and the future economic outlook. For example, in 2013, he said $28.7 billion in oil and gas sales resulted in $5 billion in mineral royalties, $4 billion of which were private mineral ownership royalties.

A panel on rail infrastructure and transload facilities in western North Dakota featured Dave Thomson, CEO, New Frontier LLC, and principal with Engineered Rail Solutions LLC, who discussed finding efficiencies through rail. Neil Amondson, co-founder of Northstar Transloading, spoke on developing a Bakken transload mega-site. 

North Dakota Public Service Commission Chair Julie Fedorchak briefed attendees on oil and gas infrastructure projects regulated by the commission. She said North Dakota’s current pipeline crude export capacity is 827,000 barrels per day (bpd). By 2017, it’s projected to increase to 1.5 million bpd and reach 1.86 million bpd by 2020.

Commercial construction and property valuation was the subject of a panel moderated by Luke Geiver, editor of The Bakken magazine. Speakers included Mike Dunn, business development manager, Construction Engineers, and Mike Elliott, managing principal, Energy Real Estate Solutions. Dunn noted that his company is contracted to construct the new Watford City jail, a $52 million project scheduled for completion in 2017.

Dale Niezwaag, senior legislative representative at Basin Electric Power Cooperative, a generation and transmission cooperative with a service area spanning nine states, is working to meet electrical demands in western North Dakota. The cooperative forecasts that its electrical load will grow another 2,828 megawatts by 2035, with 1,850 megawatts of that growth occurring in the Williston Basin.

“The big part of the Bakken play is the clash of how to meet needs of the cultures from the oil side to the utility side,” said Niezwaag. “Sixty-five percent of all our growth is going to be in the Bakken, so it is a major part of our business and a major part of our focus is making sure we have low cost power to get to people working in the area.”

The afternoon session included a presentation by Lyle Jensen, president of American Power Group, who detailed his company’s efforts to use its dual-fuel technology in the Bakken. It enables trucks to operate on a combination of diesel fuel and clean-burning CNG, offering the advantages of decreasing flared gas, reducing diesel emissions and higher operating efficiencies for trucks. 

The impact of the Bakken’s growth on aviation was covered by Chris DeCrescente, general manager of the Tioga Aero Center. He noted that from 2009 to 2014, there was a 46 percent increase in direct airport management employment; a 70 percent increase in people arriving in general aviation aircraft; a 61 percent increase in visitors arriving on commercial airlines; and a 150 percent increase in state and federal funding for the state’s airports.

Tim Brown, senior vice president, MBI Energy Services, spoke on the company’s efforts to develop and use a world-class oil training facility. MBI has experienced 800 percent growth since 1979 and has 2,000 employees in multiple locations. It partnered with Diamond B Technology Solutions to develop and launch a certificate-tracking solution to improve the administration and management of all training certification.

In a presentation on water infrastructure serving the oil and gas industry, Steve Burian, CEO of AE2S and its affiliated companies, reviewed the challenges of supplying water to municipal, rural and industrial users in western North Dakota. He said that in 2013, the state’s oil and gas industry accounted for 5 percent of the state’s consumptive water use, with irrigation using 54 percent, municipal water 20 percent, industry and power 16 percent and rural water 4 percent. Of the nearly 30,000-acre feet of water used by oil and gas operations in 2014, 73 percent came from surface water sources and 27 percent came from groundwater sources.

Monday’s session ended with a special presentation titled, “Bakken Workforce Update,” which covered employment trends, challenges and opportunities for businesses in the Bakken. The panel included Cheri Giesen, executive director, Job Service North Daktoa; Michael Ziesch, manager of the Labor Market Information Center, Job Service North Dakota; Nancy Hodur, research assistant professor at the NDSU Agribusiness and Applied Economics Department; and Patrick Bertagnolli, human resource director at B&G Oilfield Services.

Despite the low price commodity, Giesen said, “We still have 60 people a day coming into our Williston office to get help finding a job.”

Ziesch said North Dakota’s oil and gas industry represents nearly 17 percent of the state’s total private employment with 7.4 percent in drilling, extraction, production and refining; 2.9 percent in infrastructure development; 1.7 percent in professional services; 3 percent in transportation; and 1.7 percent in wholesale and manufacturing.

“We’ve seen the workforce shift from jobs in manufacturing to the healthcare and service providing side of the economy,” said Ziesch. "Our first (significant) change we expect to see is on the earnings side, rather than the employment side."

Hodur discussed preliminary results she’s obtained through a workforce survey of oil and gas employees. To date, her survey has more than 1,400 observations with 14 firms representing roughly 7,640 employees. Hodur said among those interviewed for her survey, most said housing continued to be the number-one issue because there’s not enough and it’s too expensive.

Bertagnolli outlined B&G’s efforts to retain quality employees during difficult times for oilfield services companies. Employee education, an emphasis on safety training, noting positive accomplishments, good benefits and community involvement are some of the steps B&G has taken with its employees, he said.

Upstream, Midstream Perspective
On the second day of the Bakken Conference and Expo, attendees heard from the Williston Basin’s largest producer—Continental Resource Inc.—about why it’s crucial to the Bakken and other shale plays to end the U.S. ban on crude exports. There was also big news about the largest construction project ever proposed for North Dakota, the Badlands NGL polyethylene plant which will use Bakken-produced ethane.

Keynote speaker Gary Gould, Continental’s senior vice president of operations, said OPEC’s manipulation of global crude prices and its predatory pricing program is trying to drive tight, light oil out of business. He made the case for ending the “archaic” U.S. export ban policy to become energy independent, help American allies, lower gasoline prices for consumers and become the world’s swing oil producer.

Gould said that since the policy against exporting U.S. crude was established in the 1970s, the U.S. has gone from oil scarcity to abundance, which has caused oil imports to drop 70 to 80 percent. Over the past 10 years, U.S. production has doubled and has represented nearly 40 percent of the world’s growth. In contrast, OPEC production increased just 3 percent in the same time period and other countries grew only 1.5 percent.

“The United States has the resource, the people and the technology. So we’re in a very good place as a country,” Gould said. “There’s lots of good news here.”

He referenced OPEC statements indicating the organization’s intention to control world oil prices by attempting to shut down light, tight crude from U.S. shale.

“Nobody wants $200 oil, and we don’t want $50 oil, either,” he said.

Gould said there is growing bipartisan support for Congress to pass legislation to end the crude export ban. He urged the audience members to contact their elected representatives to support such measures.

William Gilliam, CEO of Badlands NGL LLC, used the conference as an opportunity to announce that the company’s massive construction project has grown from $4 billion to $6.5 billion. When crude prices return to the $70 per barrel level, he said, “We think with that we can build 2 million ton ethane cracker in North Dakota. We will have something world-scale—or perhaps bigger—in North Dakota.”

Last year, Gilliam and North Dakota Gov. Jack Dalrymple announced Badlands NGL’s plan to build a polyethylene plant in North Dakota that would use ethane from the Bakken to produce consumer and industrial plastics, as well as other byproducts such as hydrogen, nitrogen, CO2, propane and propylene.

Gilliam explained how the market potential was so great that the company was now planning to build two plants. The first plant will be smaller and constructed within three years in the continental U.S. at a site that’s been selected, but Gilliam referred to only as “Shangri-La.”

Gilliam said Badlands NGL is close to selecting a site for its North Dakota plant and construction would begin as soon as binding agreements are signed. Although building the North Dakota plant is complicated by weather, transportation and workforce problems, Gilliam said a North Dakota polyethylene facility is closer to U.S. and Asian markets. In addition, it provides less expensive and faster rail and shipping transport options.

John Harju, associate director for strategic partnerships at the University of North Dakota Energy & Environmental Research Center, provided a look back at the technological changes and people who helped make the Bakken a world-class oil play.

Allison Ritter, public information officer with the state Department of Mineral Resources gave a rundown on regulatory changes from the last legislative session that include pipelines, flaring and oil conditioning. She said North Dakota needs to complete an average of 115 wells per month to retain production of 1.1 million barrels per day and thus far is averaging 120 completions per month.

David Williams, CEO of Missouri River Resources discussed efforts to get into the oil production business on the Fort Berthold Reservation and plans to further expand. He also covered the workforce development project started at New Town.

“Someone has to take the baton and move the play and industry forward,” Williams said. “We felt there’s a great need for this.”

Geiver moderated a wide-ranging industry roundtable that included geologist Kathy Neset, owner of Neset Consulting Service; Brandon Elliott, executive vice president of corporate development and strategy for Northern Oil and Gas Inc.; and Dan Eberhart, Canary Wellhead CEO.

Eberhart said that in the current low-price environment, the Bakken “has played with one hand tied behind its back compared to other shale plays” because of lack of people and infrastructure. However, he believes that the play will emerge stronger and be “the biggest winner” because the state is taking the correct approach to fix problems during the downturn.

Neset admitted that the slowdown in drilling activity has hurt her company, but that it is becoming more efficient and keeping employees busy—even if it means having them wash windows and do landscaping rather than outsourcing work.

“We’re being efficient, being effective and showing the rest of the world the standard America goes by,” she said. “We have a choice as to how we deal with it.”

Elliot provided the non-operator perspective on investment trends in the Bakken. He said that initially with oil prices falling, there was a flush of capital leaving North Dakota that shifted to other shale plays where costs were lower and returns were higher. But time has shown that the core areas of the Bakken remain profitable and provide good opportunities for those who understand it.

“The downturn will give this basin the opportunity to show why it was such an exciting place to discover,” Elliot said.

Geiver asked each member of the panel what it is that people outside of the Bakken didn’t know about the play or perhaps misunderstood.

“I think there’s slowly becoming a realization that we do have a core of this play that’s economic to very low WTI prices—and that’s with service costs only coming down 15 or so percent,” Elliott said. “When we get a little bit more service cost relief and we get the engineering and geology side focusing on completion designs and recoveries, we’ve got some tight curves and we’ve got some areas in this play that are clearly very profitable.”

Neset said, “I hear so many misconceptions about what the Bakken is, what the Three Forks is, how we’re going about it, and I think it’s so important that we continue to work on that perspective because—like it or not—we do need the support of the general public in understanding what this energy industry is.”

In Eberhart’s view, “The thing that will help the Bakken the most is if in this difficult time we can get some infrastructure improvements in place and get some more takeaway capacity in place and really close some of that gap between the cost structure of the Permian and the Eagle Ford and the Bakken. I think that’s in the Bakken’s best interest. That will help it to grow over time and become even more important in the U.S. energy picture.”

The afternoon session opened with an in-depth look at Continental’s Hawkinson Project which—in partnership with the EERC’s Bakken Optimization Program—drilled and completed 11 wells on a single unit from one pilot hole at a cost of $92 million for drilling and completions and $14 million for gathering and analysis of scientific data.

Project results were presented by Harju and Heath Mireles, manager of resources development, Continental Resources. According to Harju, in 2006, the average lateral length was 6,167 feet for a Bakken well with 9,925 barrels as the average fracturing fluid volume. In 2014, the average lateral length was 9,719 with an average fracturing fluid volume 89,747 barrels. Also in 2014, the total volume of fracturing fluid for Bakken wells was approximately 179 billion barrels.

Mireles said that studying the Hawkinson Project showed that 200-foot heel/toe setbacks result in uncaptured resources and that 50-foot setbacks would lead to greater recovery. He provided a video rendering detailing the study’s results. The idea behind the “science project” is to give Continental and other operators in the Williston Basin a better understanding of the appropriate well pad design, spacing between laterals and how several geologic formations react to certain fracking designs.

Based on the results, Mireles believes the data is strong enough to change the way the North Dakota portion of the Williston Basin is developed. He proposes that the state should place its setbacks (the space minimum a well bore must be from the spacing unit's invisible boundary) at 50 feet. Doing so, could increase oil production in a given spacing unit by up to 10 percent.

Dave Johnson, director of total environmental management systems with Nuverra Environmental Solutions Inc., described operations at the company’s new Terrafficient Processing Facility at Watford City. The process turns wet drill cuttings into an “earth friendly” product that can be used for applications such as road bases, gravel additives, construction fill and flowable fill. Johnson noted that the process also recovers water and hydrocarbons for reuse while reducing carbon emissions.

Bilu Cherian, director of reservoir engineering with Sanjel, continued the afternoon’s exploration and production theme with a presentation on well completions in the Bakken. He was followed by a panel on the future of hydraulic fracturing which included presentations by Hema Prapoo, senior account manager with Allied-Horizontal Wireline Services; Jeremy Dockter, co-founder and managing direction of Expansion Energy; Mahmoud Asadi, director of oil and gas technology for Praxair Services Inc.; and Dax Cornelius, CEO of Torrid Technologies Group.

Hesham El-Rewini, dean of the UND College of Engineering and Mines, ended the second day with a presentation on the school’s petroleum engineering program. Enrollment in the program has grown from four undergraduate students in the fall of 2010 to 300 students in the spring of 2015, including 31 females and 13 graduate students.

Day three of the conference got underway with Grant Levi, director of the North Dakota Department of Transportation (DOT), who described the tremendous growth the state has experienced in agriculture, manufacturing and energy, which has resulted in record population and a 29 percent increase in employment.

According to Levi, from 2010 to 2014, traffic increased 26 percent on all North Dakota highways and 71 percent in the oil-impacted counties. The state DOT has received $2.26 billion in funding for road projects in the 2015-2017 biennium with $1.44 billion designated for projects in western North Dakota.

Levi outlined work on major road projects such as the four-laning of U.S. 85 between Watford City and Williston and truck bypass relief routes for Watford City, Alexander, New Town, Dickinson, Williston and Killdeer totaling more than $350 million in construction. He said total costs for North Dakota’s 2015 construction season would be approximately $807 million.

Focused Experts Explain Williston Basin
Bakken operations in a low-oil-price environment was the focus of a presentation by Jonathan Garrett, principal analyst and Bakken expert with Wood Mackenzie Ltd. Although the firm expects U.S. onshore production to flatten and Bakken rig counts to significantly decline, Garrett said North Dakota’s production is expected to hold steady at near 1.2 million barrels per day throughout 2015 and 2016.

Low oil prices have caused producers to concentrate operations in the Bakken’s “sweet spot,” which has enabled drilling to continue. Garrett said more than 95 percent of rigs in the Bakken during April 2015 were focused on the higher return sub-plays of the Bakken and Three Forks formations.

According to Garrett, the highest IPs and declines in the Bakken shale play are in the Nesson Anticline sub-play because of mature, over-pressured and naturally fractured shales around the geologic structure. Sub-plays neighboring the Nesson Anticline have mature shales and are also over-pressured. These sub-plays exhibit high IP rates, but shallower declines than along the Nesson Anticline, he said.

With perhaps one of the most attention-getting titles of the conference “Proppant Frackonomics in the Bakken,” Tihana Fuss-Dezelic, global marketing manager with Saint-Gobain Proppants, discussed how to select a proppant that’s technically, environmentally and economically sound. She also noted that French-based Saint-Gobain has been in existence for 350 years. Her presentation covered the purpose of proppants and the company’s research on the differences between sand, bauxite and ceramic proppants.

Jed Tallman, manager of U.S. market development for Ferus CNG provided an overview of how the company is turning flared gas into CNG to power operations. He noted that the process can result in diesel cost reductions of 20 to 40 percent, reduces flaring, lowers emissions of particulate matter and greenhouse gases, and reduces NOx and Sox emissions.

A panel titled “Finding Oilfield Efficiencies” included four representatives from three companies who described how to improve operations through automation, repairing and restoring parts and optimizing well operations through a better understanding of flow measurements. The presenters were Ken Olexa, general manager, and Ryan Bacon, project development team lead, with JDP Automation Inc.; Dale Wietzema, sales manager with Gremada Industries—AIM Machining; and Nicholas Sikes, account manager with Emerson Process Management.

As expected, flaring was a hot topic at the conference, and a panel of four experts discussed the latest advancements in gas processing technology. Audrey Mascarenhas, president and CEO of Questor Technology covered power generation and treating produced water using flared gas. Mike Mayers, corporate business development manager with Aggreko, described the company’s technology, which uses stranded Bakken-associated gas for temporary power production. Leo Eskin, president of LPP Combustion LLC focused on how LPP’s unique flex-fuel power system turns flared gas into electricity. Russell Goss, territory manager for Caterpillar Oil & Gas, highlighted the company’s flare-to-power success stories.

To close out the conference, Geiver moderated a panel on environmental issues that included waste handling, remediation, preventative strategies and environmental law enforcement. Kurt Rhea, general manager of SECURE Energy Services on-site services division, provided a regulatory update on TENORM (technologically enhanced naturally occurring radioactive material) and discussed disposal and treatment options for it. Wes Dickhut, senior geotechnical engineer with Braun Intertec, showed how the company designs stable well site pads in difficult, remote locations, as well as how to repair them when slides occur. 

Jeff Martinez, special agent in charge of the Denver office of the U.S. Environmental Protection Agency’s Criminal Enforcement Program, outlined the conditions under which the EPA pursues charges for environmental crimes. He said the program’s mission is to investigate and refer for prosecution the most significant and egregious violators of environmental laws that pose the greatest threat to human health and the environment.

The environmental impacts of oil and gas activities on groundwater are frequently in the news. Joel Galloway, associate director of the U.S. Geological Survey’s North Dakota Water Science Center, presented the results of a USGS groundwater study in the Williston Basin. Randomly sampled water from 34 wells found no indication that energy development activities affected groundwater quality in the upper Fort Union Formation, according to Galloway.

Although many conference speakers acknowledged the challenges ahead until oil prices rebound, the number of potential solutions available to improve efficiencies and lower costs—combined with the increasing level of knowledge of the Bakken formation and the evolution of technologies that will assist in capturing a larger quantity of the energy resource—the overall mood was upbeat and positive.

Author: Patrick C. Miller
Staff Writer, The Bakken magazine
701-738-4923
pmiller@bbiinternational.com

 

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From The Show
Factoids From Bakken Conference Presentations

1 Continental’s Hawkinson Project—in partnership with the EERC’s Bakken Optimization Program—drilled and completed 11 wells on a single unit from one pilot hole at a cost of $92 million for drilling and completions and $14 million for gathering and analysis of scientific data. Among the study’s findings were that 200-foot heel/toe setbacks result in uncaptured resources and that 50-foot setbacks would lead to greater recovery.—Heath Mireles, northern region resource development manager, Continental Resources Inc.

2 North Dakota’s current pipeline crude export capacity is 827,000 barrels per day (BPD). By 2017, it’s projected to increase to 1.5 million BPD and reach 1.86 million BPD by 2020. – Julie Fedorchak, chair, North Dakota Public Service Commission.

3 From 2010 to 2015, Watford City has borrowed more than $300 million for projects that include a $54 million high school; a $92 million community events center; a $30 million wastewater plant; a $27 million special improvements district; a $58 million hospital and clinic; a $50 million county law enforcement center; a $10 million apartment complex; and a $5 million day care center.—Brent Sanford, mayor, Watford City

4 North Dakota’s oil and gas industry represents nearly 17 percent of the state’s total private employment with 7.4 percent in drilling, extraction, production and refining; 2.9 percent in infrastructure development; 1.7 percent in professional services; 3 percent in transportation; and 1.7 percent in wholesale and manufacturing.—Michael Ziesch, manager, Labor Market Information Center, Job Service North Dakota
 

5 According to a North Dakota State University study on the economic impact of the oil and gas industry on North Dakota for 2013, $28.7 billion in oil and gas sales resulted in $5 billion in mineral royalties, $4 billion of which were private mineral ownership royalties.—Dean Bangsund, Department of Agribusiness and Applied Economics, NDSU

6 In 2006, the average lateral length was 6,167 feet for a Bakken well with 9,925 barrels as the average fracturing fluid volume. In 2014, the average lateral length was 9,719 with an average fracturing fluid volume 89,747 barrels. Also in 2014, the total volume of fracturing fluid for Bakken wells was approximately 179 billion barrels.—John Harju, associate director for research, University of North Dakota Energy & Environmental Research Center

7 Wells waiting on completion has helped drive the success of North Dakota’s gas capture program. Statewide, 82 percent of gas is being captured rather than flared. The next target is an 85 percent gas capture rate by January 2016.—Alison Ritter, public information officer, North Department of Mineral Resources

8 From 2010 to 2014, traffic increased 26 percent on all North Dakota highways and 71 percent in the oil-impacted counties. The state’s Department of Transportation has received $2.26 billion in funding for road projects in the 2015-2017 biennium with $1.44 billion designated for projects in western North Dakota.—Grant Levi, director, North Dakota Department of Transportation

9 The highest IPs and declines in the Bakken shale play are in the Nesson Anticline sub-play because of mature, over-pressured and naturally fractured shales around the geologic structure. Sub-plays neighboring the Nesson Anticline have mature shales and are also over- pressured. These sub-plays exhibit high IP rates, but shallower declines than along the Nesson Anticline.—Jonathan Garrett, principal analyst, Wood Mackenzie Ltd.

10 Saint-Gobain Proppants, headquartered in France, was started in 1665, making the company 350 years old.—Tihana Fuss-Dezelic, global marketing manager, Saint-Gobain Proppants