A new US oil rush could rock OPEC

The Bakken Shale oilfield in North America holds hundreds of billions of barrels of crude oil.

It contains hundreds of billions of barrels of light crude oil and thousands of wells and should be scaring the pants off any oil exporter needing high crude prices to balance its budget. It is the Bakken Shale oilfield, which sprawls across two Canadian prairie provinces and two western US states including North Dakota, under 500,000 square kilometres of land. Its US portion is described as the country's largest oil deposit outside Alaska. With its biggest and most accessible part in Canada, the Bakken could prove to be one of the largest oilfields in the world.

The American Association of Petroleum Geologists says it is the biggest continuous oil accumulation it has ever assessed. "There's no question there's a tremendous amount of oil in place in general in the Bakken Shale," said Bud Brigham, the chairman, president and chief executive of Brigham Exploration, a Houston oil junior that started buying Bakken properties five years ago. "It is very large, onshore and in the US," said Harold Hamm, the chief executive and chairman of Continental Resources, which is the biggest Bakken lease holder. "We're going to be drilling there for the next 10 years."

The company, based in Oklahoma, reported a 93 per cent increase in its second-quarter oil production from its fields in North Dakota, driving a 37 per cent increase in total output. The geologist JW Nordquist discovered the Bakken in 1953. He described it as an "Oreo cookie" arrangement of hard dolomite rock sandwiched between two darker shale layers. For decades, petroleum geologists thought the Bakken shale was the source of the oil pools in the wider Williston Basin. But in 1999, Leigh Price, a geochemist working for the US Geological Survey (USGS), wrote a paper proposing that most oil from Bakken shale was still trapped in the Bakken Formation. He suggested the "cream" in the cookie contained up to 500 billion barrels of crude, making it a prime exploration target. It is the dolomite "filling" that contains the oil causing all the excitement today, although that oil may have originated in the surrounding shale.

Mr Price died in 2002, before his paper was published. The USGS was sceptical and for years refused to release the report and their review of it. In the meantime, an independent petroleum geologist, Richard Findley, had reviewed drilling logs from abandoned Bakken wells and surmised that their operators had missed the pay zone by drilling right through the hard rock between the two shale layers. He interested Lyco Energy, based in Texas, in his theory. Lyco brought in the services company Halliburton to try out what were then new technologies: horizontal drilling; and hydraulic fracturing.

In eastern Montana in 1997Findley, Lyco and Halliburton discovered the Elm Coulee oilfield. It now pumps about 50,000 barrels per day of light, sweet crude and is considered a small part of the Bakken field. Further research by geochemists and geologists not associated with the USGS has largely vindicated Mr Price, although estimates of Bakken oil in place have ranged from 10 billion to 500 billion barrels. The most recent, stemming from sophisticated computer modelling, suggests 300 billion to 400 billion barrels could be realistic.

But oil in place is not the same as recoverable oil or reserves. Dolomite is a hard, dense rock with tiny pores, which makes the oil difficult to extract. In 2008, the USGS estimated that about 4 billion barrels of oil could theoretically be produced from the US Bakken with current technology It represents enough oil to satisfy US consumers for about six months - hardly a game-changer. But the Bakken is still in the early stages of development. Technology is advancing, so actual oil recovery could vastly exceed initial estimates. Already, Canada's Crescent Point Energy has tested a fracturing and water-flood regime that boosts recovery from wells in Saskatchewan to 30 per cent of oil in place.

"These mainly untapped resource pools provide Crescent Point with over 5,000 drilling locations and the potential to add over 500 million barrels of reserves," Scott Saxberg, the company's president and chief executive, told the Calgary Herald newspaper. "It's unique that it's light oil, and in our back yard, and it's low cost," he told Canada's National Post. Costs for producing oil from the relatively shallow wells required to tap Bakken oil pools have fallen to about $5 per barrel, compared with tens of dollars per barrel for extracting tar-like bitumen from Canada's oil sands and chemically converting it into synthetic light crude.

Big pipeline developers such as the Canadian company Enbridge are expanding their networks to accommodate more oil from the Williston Basin. The horizontal drilling and fracturing techniques that Halliburton pioneered to unlock the mid-continent oil treasure are the same technologies that in 2007 spurred a US gas-drilling boom. The effects of that have rippled around the world, weighing not only on North American gas prices but also on international markets for the liquefied natural gas now shipped across oceans from states such as Qatar.

OPEC producers would do well to remember that; the next threat to oil price stability may come not from market speculation or renewable energy but from a new North American oil rush. tcarlisle@thenational.ae