09/09/2013

Shale Market Opportunity Snapshot: Mountain / Northern Great Plains

Challenges and opportunities in the Bakken, Three Forks and Niobrara shale plays

This article is part of a series from FPDA examining opportunities and challenges in shale oil and gas markets. This article provides a snapshot of opportunities and challenges in the Mountain / Northern Great Plains region.

The Bakken formation, located in the Williston Basin, covers a large part of North Dakota and the northeastern corner of Montana, as well as parts of Canada. While a 2008 assessment by the U.S. Geological Society had deemed much of Bakken’s oil to be unrecoverable, an updated assessment released in April estimated that the Bakken and underlying Three Forks formations contain an estimated mean of 7.4 billion barrels of undiscovered, technically recoverable oil, more than twice the estimate in the previous report.

The Niobrara play covering parts of Colorado and Wyoming has also contributed to high production rates in the region. Like in North Dakota and Montana, developing extraction technology combining horizontal drilling and hydraulic fracturing has enabled the extraction of reserves previously thought unrecoverable.

Opportunities

Some of the greatest shale-driven opportunity in the region may be found in the following states, ranked in order from the largest to smallest natural gas gross withdrawals and production from shale gas wells. The 2011 production data and other data that follow are from the Energy Information Administration.

Niobrara shale in Colorado contributes to dry natural gas reserve estimates as high as 24 trillion cubic feet (2011). From 2007 to 2011, annual natural gas withdrawal and production from shale gas wells increased 53 percent to 212 billion cubic feet. In the five years leading up to 2011, the number of producing natural gas wells increased 46 percent to more than 30,000 wells.

Natural gas withdrawals and production from shale gas wells in North Dakota were estimated at 115 billion cubic feet in 2011, 16 times the amount produced there in 2007. In June, North Dakota’s daily production reached 821,531 barrels, a 24 percent increase from just a year ago, according to the North Dakota Department of Mineral Resources. 2011 estimates from the EIA suggest the state has 1.7 trillion cubic feet of dry natural gas reserves.

New Mexico’s marketed production of natural gas accounted for 5.3 percent of U.S. marketed natural gas production in 2011. Gross withdrawals and production from shale gas wells increased 72 percent from 2007 to 2011, to 93 billion cubic feet. 2011 EIA estimates place dry natural gas reserves in the state at around 15 trillion cubic feet.

Shale gas wells in Montana withdrew/produced 13 billion cubic feet of natural gas in 2011, despite a 10 percent drop in production from to 2007 levels. The state had 6,477 producing natural gas wells as of 2011.

Challenges

In North Dakota, rapid industry growth in recent years has created problems as oil and gas development has outpaced infrastructure development. Several FPDA fracking survey participants mentioned difficulty in keeping up with growth in the region, and one respondent said finding real estate for new branch locations was a challenge.

The Associated Press reported in June that in an attempt to alleviate infrastructure challenges, North Dakota's state land board awarded $71 million in grants to communities in the western part of the state. According to state officials, North Dakota’s Energy Infrastructure and Impact Grant Program will award more than $240 million in grants over the next two years.

While the development of more efficient extraction methods have enabled or increased production in many areas, it has also drawn public attention to the environmental impact of the extraction.

In Colorado last November, Longmont voters were the first in the state to pass a city-wide resolution to ban hydraulic fracturing, a resolution that is now being challenged by both The Colorado Oil and Gas Association and the administration of Colorado Gov. John Hickenlooper. Similar resolutions have passed in Boulder County and in the cities of Boulder, Colorado Springs, Erie, Fort Collins and Loveland. In January, the Protect Our Colorado coalition was formed with the goal of convincing state legislators to ban fracking at the state level.

Although Wyoming boasts some of the largest natural gas reserves in the region at 35.1 trillion cubic feet, natural gas withdrawals and production from shale wells in 2011 was only 4.8 billion cubic feet, compared to the 211.5 billion produced that year by neighboring state Colorado. In 2010, the Wyoming Oil and Gas Conservation Commission voted to require full disclosure of the hydraulic fracturing fluids used in natural gas exploration. By the end of 2011, annual natural gas production/withdrawal from shale wells had dropped 16 percent from 2010 levels, following three consecutive years of increases.

Local fracking moratoriums and restrictions have also been passed in New Mexico, in San Miguel and Mora counties and in the city of Las Vegas.