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Julie LeFever, a petroleum geologist with the North Dakota Geological Survey, shows a representative sample of rocks in their correct layers from the Bakken formation in North Dakota at the NDGS core library in Grand Forks on March 7.

By: DAVE CALDWELL

GRAND FORKS Since the discovery of oil in the Tioga area in 1951, the North Dakota oil industry has seen its ups and downs. In recent years, however, high crude prices have made exploration and production on a massive potential oil play, the Bakken formation, an attractive prospect for many oil companies.

What exactly is the Bakken? Where did it come from, and just how big is it? These are among the "questions of the day" in the mind of many regarding the industry.

In order to find the best possible answers from the best possible source, The Minot Daily News sat down with Julie LeFever, a petroleum geologist with the North Dakota Geological Survey and a recognized Bakken expert, in her office on the campus of the University of North Dakota.

Where did Bakken come from?
"It's been around a long time," said LeFever. "It was in the news in the late '80s, early '90s, when horizontal technology became kind of the standard method of drilling. It had a previous episode of drilling activities with conventional vertical wells in the mid- to late-'70s. (It was) nothing spectacular ñ some good wells, but nothing spectacular. In the late '80s, early '90s it was the first time the technology breakthrough was applied to the Bakken, and it was very successful for some companies. It got a lot of press at that point in time, and there were a lot of companies at that time that got into the play because of the news, probably didn't do their homework and spent a lot of money without returns.

"That kind of quieted things down. A lot of those wells still produce and have been producing since the late '80s, early '90s; a lot of the wells that were drilled in the late '70s are still producing. So the rock's been around a long time. They know it's a potential oil supply, but the problem's always been how to get it out."

A Texas-sized oil play
LeFever credits work on a Texas oilfield as a major catalyst in the new Bakken play.

"I think and I might be wrong on this some of the start of this was due to some success in the Barnett Shale down in Texas, a gas reservoir with similar type of rock," she said. "Not really what we'd normally call a reservoir rock, more of a source rock. Now technology has been developed in the last few years that they can actually go in and fracture-stimulate these wells. It worked down in the Barnett, and there was a group that tried it in Montana in 2001, and had very, very good success.

"They kept it quiet for a while, but now over the last two years or so, that activity has moved across the border following some of the same trends, but not having necessarily the same results. The rocks change just enough to create some problems. So right now, activity has slowed a little bit, because rig prices have gone through the roof. These wells are real expensive to drill. I think the average well now is running $4 million or $5 million to drill. I think we're going to see a slowdown in all of the drilling until the rig prices go down."

LeFever was asked if she thought the heavy rig prices were being driven by the cost of the technology that the newer, higher-tech units are utilizing.

"I think it's supply and demand," she said. "When you have 20 rigs and 60 companies want the rigs at the same time, they can charge pretty much whatever they want, and that seems to be the real problem. When the play started in 2001, these wells were drilling at $2.2 million. Now they're well into the $5 million range, which affects your economics down the road. You've got to have a good well that's going to give you the payout you want in a short period of time. They're going to have to hit a happy medium, or companies will just quit drilling. It's not economic for them to drill."

Anatomy of the Bakken
"North Dakota is in part of the Williston Basin, which is exactly what it sounds like, the same as a washbasin-type thing," LeFever said. "At the time the Bakken was deposited, we were connected to a seaway into Alberta. It came across Alberta into southern Saskatchewan and into North Dakota. The formation is not unique there are equivalent formations that are just like it all over the world. At that particular period of time, these were the kind of rocks that were being deposited. Many of them are oil-bearing, most of them are gas-bearing. The rock in the Williston, it takes so much pressure and temperature to turn it into gas, and it's not deep enough (to produce much gas). Most of the other formations, I believe, are around 14,000-18,000 feet; the Bakken's only at 10,000. So it's still in what they call the oil window.

"The thing that makes it (the Bakken) unique and has been of interest for study academically as well as by oil companies is that it can have as much as 30 percent organic material, which is what changes into and creates the oil. We have three layers to (the Bakken) a lower member, which is a shale high in organics; a middle member, which is a siltstone-sandstone carbonate that has a little bit of organics, but it's really not considered a source rock; and then it has an upper shale, which again isn't very thick generally, it's probably a maximum of 40 feet. It (the upper shale) was what was the target during the late '80s, early '90s the original horizontal play. But it's also high in organics, so it's up to 30 percent organic material. That's really rich for what they call a source rock something that can generate oil and it's been termed a world-class source rock."

Why so much organic content?
"That's not my specialty," she said with a laugh. "It was a worldwide event because there are other rocks that are just about as rich that are at that time period, so whatever the climactic conditions were or what the seas were doing at that time, I don't know. At one time, there was a whole lot of black, ugly rock being deposited."

The source rock story
"Source rocks are not necessarily reservoir rocks, and in this case the Bakken has had two attempts at drilling, which kind of proves that it's a source rock," LeFever said. "This is its third attempt, and this is because technology's getting to a point that it can deal with these unconventional rocks they don't have what you'd like to see in a source rock. A reservoir rock is something that's more like a sponge. It's got lots of holes, and those holes are interconnected. The Bakken's not like that. It doesn't have many holes to store the oil, and it has even less in the way being able to transmit oil from one hole to the next. It has very low porosity, very low permeability what we would term an unconventional reservoir. Those are what's becoming more of the targets now throughout the U.S. not just the Williston because the price (of oil) is higher. (Wells are) expensive, but if you're going to get the return, it takes a lot more money to drill a well. When you're drilling, you're betting you're going to find something. When the rock you're going after isn't optimal reservoir rock, you're going to spend a lot more money and you're going to have a lot more failures. So in order for this unit to be of interest, the price has to be high.

"The other thing is that technology has progressed so far. In the early '70s, we were able to go in, drill a vertical well and basically pump it up pressure it up and the pressure would fracture the rock and break it all up. And by doing that, we were able to recover the oil that's trapped in all these little holes that don't 'talk to' each other.

"When they drilled the horizontal wells in the late '80s, early '90s, they couldn't do that. So if they didn't hit a regional fault of some sort, or regional fracture system that was related to the Basin, it didn't produce or it produced very poorly. There wasn't any way to break up the rock. The difference now is with technology, not only can they go out and drill a lot further horizontally, but they can also go in and pressure these horizontal legs up and break the rock mechanically. They don't have to rely on the natural fractures, they can stimulate it themselves.

"Another thing that's interesting is that these wells have two to three lateral legs that are 5,000 feet long at 10,000 feet down. That, to me, is pretty cool technology. They're going into the middle member, which is also different from the first play, because it's a little more competent, I think. It's definitely got some potential, but the ability to go in give it a fractured-stimulation treatment allows you to tap into the shales above, maybe below, and the rocks immediately above and below (the shales), keep control of that and drain that whole area. That's a big positive in what they've been able to do. So it's not uncommon for some companies to drill one 5,000 foot lateral, some think two and one of the players thinks they need three. The rock is very, very tight again the holes within the rock don't communicate between each other so you really don't know how much it's draining. They could be draining just a fraction of the area, or they could be draining lots you just don't know. That's kind of something they determine later."

What is Bakken crude used for?
"It's probably gasoline, I would guess," LeFever said. "Very light, very sweet oil that almost looks unrefined about like the consistency of what you'd put in your gas tank. Very light, high gravity; very nice, good premium-dollar oil. It converts due to temperature and pressure. It has to reach about 9,000 feet for this kind of organic material to start to convert to oil and gas."

The future of the play
LeFever said she's not sure the success of the Bakken drilling will go on indefinitely.

"It was slowing down. The successes in North Dakota have not been as good as some of the ones in Montana," she said. "So things are starting to slow down. They're expensive wells to drill, and it doesn't just affect the Bakken. It affects all the plays that are going on, and we've got two or three different plays. Sometimes companies can figure out a way of getting around that a little bit, but it's a nationwide problem.

"I was talking to a friend in Saskatchewan the other day, and Saskatchewan is having the same problem not enough rigs and the price skyrocketed overnight. The price hadn't been high enough to generate a lot of exploratory activity. There's always been some background drilling going on, but when it reached such a height, then it encourages the companies to go explore in the 'back yard' instead of importing oil from other states. So until this price settles down, I think we're going to see a little bit of a drop in drilling. With the Bakken itself, there were already companies and are companies that are losing interest in it because the successes haven't been as good here (in North Dakota). They were very good in Montana. And the biggest problem I see from all of that is that they're trying to take the Montana process and apply it to North Dakota. But the rocks changed just enough to where it wasn't going to work. Now there have been recent successes in the Mountrail County area (around Parshall) that have certainly perked everybody's interest. There has been a new field discovery up in Manitoba in some rocks that are adjacent to the Bakken, partly Bakken production, but it's also Three Forks production, which immediately underlies the Bakken. Those things are going to result in an increase in drilling.

Confidentiality and competition
"We (North Dakota) have a confidentiality period," LeFever said. "As these companies figure out why one area's working and the rest of it isn't, or what this company is doing differently (the company will follow suit)." There's definitely competition involved in there, but the fact is that there's one company EOG that's been having some very good success. So I think we'll see an increase in interest related to that. Nobody's giving up on it yet because the oil prices have remained high enough. There's always a learning curve with every one of these plays, and as long as the price stays high enough to get you through that learning curve hopefully we'll get the success and they'll continue drilling. If we see some wells don't do well and don't seem to have success, then it will taper off. They'll go on to something else, something that's going to pay.

"But the first thing that's got to give a little bit is rig prices. I talked to a fellow from Amerada (now Hess) in Williston where I gave a talk, and he said his rig prices at that time had jumped from $9,000 a day to $13,000 a day, and that really changes your economics on how many wells you can drill if you're given a limited drilling budget, how many wells you can drill in that time. Now, I think the cost is like $29,000 a day, and these wells take, I would guess, about 40 days to drill. I had heard for these fracture-stimulations, it was about $500,000 to stimulate one leg of those wells. So you can do the math. If you have multiple legs, it starts adding up real fast."

LeFever explained the state's confidentiality policy further.
"When they apply to drill, they can ask for the well to be what they call 'tight hole,' and the confidential period is six months," she said. "So all the information that the state gets from the well is locked up for six months. So if they figure out a magic secret, nobody else will know about it for six months. But you can bet that companies watch. All that information is available online, and they pay a subscription service fee for it, and as soon as it comes off confidential status it's online.

"What (confidentiality is) usually intended for is not so much the Bakken most of the Bakken acreage is leased. But what it has been intended for is that if somebody makes a discovery and they don't have all the acreage tied up in an area, that confidential period will allow them to go and contact and lease the minerals. That's the major reason behind confidentiality. Ours isn't that long our Canadian counterparts have a yearlong confidentiality period. It just depends on the state, it varies state by state."