oil & gas from Bakken Shale & midstream industry infrastructure development
The mere mention of the phrase -- Bakken shale -- conjures and facinates oil and gas exploration companies and exasperates shale skeptics. In 2005, for 7 counties in Bakken shale country in ND, crude oil production averaged 33 thousand-bpd. In Q2 2010, according to ND Industrial Commission's oil and gas division, oil production in these same 7 counties averaged about 210 thousand-bpd. The seven-fold increase in oil production in this area is the tip of the iceberg for continued increases in crude oil production from the Bakken formation in the Williston Basin -- but only IF exploration into expanded areas of the Bakken formation is as successful as we have seen during the past 5 years.
On another note, many midstream companies have joined the shale gas frenzy. The oil & gas exploration industry's foray into shale exploration is still in its infancy and exploration may encounter obstacles and challenges in extracting the anticipated very large volumes of very rich gas from the array of shale formations in North America. Nature does not give up her bounty so easily. For example, while crude oil production from the 7 county region in ND continues to increase, natural gas production from these same 7 counties was 12-14% lower in Apr and May 2010 versus year-earlier volumes. However, we are cautious to become pessimistic on rich gas production in ND because the most current data points tend to be revised upwards as producers submit revised and corrected production data to the regulatory agency in ND.
Finally, 5 years of exploration activity yielded 181 thousand-bpd of additional crude oil production and 148 MM Cfd of additional gas production in the 7 country region. Major midstream infrastructure commitments have been made that are premised on gas production reaching levels that 10 to 20 times current production levels within the next 5 years. As an industry, we may need to temper our enthusiasm with a moderate dose of caution.
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