Wildcatter Finds $10 Billion Drilling in North Dakota: Energy
Comment of the Day

January 20 2012

Commentary by Eoin Treacy

Wildcatter Finds $10 Billion Drilling in North Dakota: Energy

This is an interesting article by Bryan Gruley for Bloomberg. Here is a section:
Thanks in part to the success of companies like Continental, the search for crude is making a quiet comeback in the U.S. Lots of attention has been paid to the surge in natural gas exploration, but more rigs are currently drilling for oil than gas: 1,191, up 402 from a year ago and quadruple the number of rigs in 2007, according to the oil services company Baker Hughes Inc. It's happening in Texas, Wyoming, Oklahoma and Ohio.

Eoin Treacy's view Unconventional oil and gas wells that depend on fracturing are drill intensive. Hydraulic fracturing results in wells with high initial flow rates followed by a swift decline to somewhat less impressive production levels. The fracturing process occurs within relatively close proximity of the well and initial production is massive because so much gas or oil is released from the fractured rock.

However beyond the fractured zone, porosity is still very poor. This generally requires more wells to be drilled, somewhat further away, to make sure that the field continues to produce at favourable rates. To the best of my knowledge this tendency is as true of shale oil wells as it is of shale gas wells. The result is that more rigs are needed because there is a constant requirement for drilling.

Drilling rigs have been migrating towards oil producing regions because of the deterioration in natural gas prices due to oversupply. Although natural gas prices are at uneconomic levels for most unconventional wells, there is little evidence yet that supply is being significantly curtailed. This is at least in part due to the need to drill if leases are to be maintained.

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