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July 28, 2009

Update on the Oilsands, Bakken, Bakken-Three Forks and Oil and Gas Drilling Technolgy

Oilsand Slower Growth and Lower Costs
Suncor expects its [oilsand] capital costs to decline by as much as 20 per cent from the peak of 2008 when it resumes oil sands expansion after its merger with Petro-Canada, which is expected to close this fall.

Oil sands producers faced increasing bottlenecks in accessing pipelines and a lack of refining capacity at the height of the boom last year. A moderate development schedule will allow time for pipeline companies to complete their expansions, and refiners to reconfigure their plants to handle the Alberta bitumen.

Canadian Association of Petroleum Producers at the height of the boom predicted oil sands production would grow to 3.5 million barrels a day by 2015. It has since revised that forecast to between 1.9 million and 2.2 million barrels a day.


Bakken - Three Forks : Possible New Oil Formation

Recent production results from 103 newly tapped wells in the Three Forks-Sanish formation show many that are "as good or better" than some in the Bakken, which lies two miles under the surface in western North Dakota and holds billions of barrels of oil.

The Bakken formation encompasses some 25,000 square miles within the Williston Basin in North Dakota and Montana. The U.S. Geological Survey has called it the largest continuous oil accumulation it has ever assessed.

The Three Forks-Sanish formation is made up of sand and porous rock directly below the Bakken shale. But geologists don't know whether the Three Forks-Sanish is a separate oil-producing formation or if it catches oil that flows from the Bakken shale above.

Fort Worth, Texas-based XTO Energy Inc. has reported to the state that one of its Three Forks wells pulled more than 2,100 barrels a day.

State and industry officials are conducting a study to determine whether the Three Forks is a unique reservoir. The plan is to compare results from closely spaced wells, one aiming for the Three Forks, and the other at the Bakken. Researchers will look at pressure changes in the formations to determine if they are connected.

Results from the study could be ready later this year, officials say. It already is spurring some speculation that the state has billions of barrels more in oil reserves.

"Eventually it could equal the Bakken, which is remarkable, and that's an understatement," Helms said.

"Is it the same or is it a separate formation? I think everybody is hoping for the latter," Harms said. "That could literally double the potential we have — a Bakken 2, if you will."

Kelso, of Whiting Petroleum, said his company's drilling activity shows that Three Forks likely is a separate formation. He said core samples taken from the Bakken and Three Forks show more hydrocarbons in the latter.

"From the core samples, Three Forks looks better for us than the Bakken," he said.

Promising production results from the Three Forks could mean that companies that come up empty in the Bakken could use existing leases to drill in the same area for Three Forks oil.

Geologists say the Three Forks-Sanish is typically about 250 feet thick. Julie LeFever, a geologist with the state Geological Survey in Grand Forks, has studied the Bakken for two decades. She believes oil found in the Three Forks-Sanish has come from the Bakken over millions of years.


Packers Plus MultiStage Drilling

Packers Plus's multistage fracturing drilling technology has opened up major new supply basins in Canada and the United States, potentially unlocking hundreds of trillions of cubic feet of new gas reserves in places like Horn River, Louisiana, Pennsylvania and even Quebec.

Where analysts once warned of looming gas shortages and the need for massive imports from offshore, now they're complaining of a popped gas bubble that has driven prices to decade lows, down more than 75 per cent from last summer. Some say $10 is a distant memory, never to return.

Three years ago, Packers could insert a half-dozen or so "stages" into a single well. As horizontal wells got longer, that number has grown to 22, and Themig says new advancements will allow virtually "unlimited" stages in a single well. That, in turn, has resulted in an order-of-magnitude higher production for a basic well that costs only about twice as much to drill.




The average conventional gas well in Western Canada produces about 250,000 cubic feet of gas a day. EnCana Corp. CEO Randy Eresman said in releasing the company's second-quarter results this week that its latest Horn River wells that use the multistage technology are coming on at initial rates of up to 11 million cubic feet per day.

Drilling results from the new shale basins are just starting to trickle in, but reserve replacement south of the border seems to validate the notion that fewer wells are producing more gas, even in the midst of a downturn.

American gas reserves grew almost 40 per cent last year and production in the Lower 48 states posted the biggest increase since the Eisenhower years, mostly due to new fracture technology. In June, the U. S. Potential Gas Committee issued a report that suggested more than a third of new gas reserves--some 600 trillion cubic feet--are found in shales that need extensive stimulation to be productive. According to Ziff Energy, Canada replaced about 91 per cent of production, even as producers slashed drilling to decade lows.

And that could be the tip of the iceberg. Eresman said North America now has enough gas to last a century at current consumption rates.

One of the earliest converts to Packers was Petrobank Energy, which used the technology to create a dominant position in the Bakken oil play. Like shale gas in northeast B. C., rocks in southeast Saskatchewan require the same drilling techniques to make the oil flow, according to Gregg Smith, the company's chief operating officer. Three years ago, the company was producing 100 barrels a day from the unconventional oil play. Today that number is around 17,000.


Multi stage fracturing for horizontal drilling was described at nextbigfuture.

Brigham Exploration in Bakken, Three Forks Using Multistage Drilling

The editors of the Oil & Gas journal Newsletter reported on July 16 that oil and gas producers are quickly learning how to improve oil recovery in the Bakken and Three Forks formations in the Williston basin.

Brigham Exploration Company reports continuing reductions in drilling and completion costs. The company is now using up to 24 stages in long laterals. The Strobeck 27-34 in Mountrail County, North Dakota flowed 1,788 bbl/day of crude oil and 1.2 million cubic feet/day of natural gas. The well, completed in the Three Forks, had 18 effective fracture stages. The well also confirmed core results from the Anderson 28-33 which showed that both the upper Three Forks and the middle Bakken were oil saturated. Completed well cost was $3.9 million, 33% less than similar wells drilled in 2008.

The average horizontal well was expected to recover between 600,000 and 800,000 barrels over a 15 year well life. Some time will have to elapse before it will be possible to extrapolate production curves from long lateral wells far enough into the future to make an educated guess about ultimate recovery. Based on experience in the Middle East, ultimate recovery could be in the millions of barrels/well. Bakken basin crude oil sells at a $5/bbl discount to Nymex traded light crude. At $40/bbl (according to a report in the latest Oil & Gas Financial Journal), profit on a well that cost $5.5 million can be $24/bbl. Now, with crude oil trading at $60/bbl, profit should be considerably higher.


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