Sustainability of oil and gas production
KLJ and the university used three approaches to forecast the sustainability of oil and gas production: economic analysis of the Bakken/Three Forks shale formation; projections on population, employment and housing needs; and potential for enhanced oil recovery (EOR).
The study showed that even at $70/bbl oil prices, economic payback times can be kept relatively short (four years and under) when initial production (IP) rates stay above 1,000 b/d. IP rates of about 2,000 b/d produce paybacks in a matter of months, even at the lower oil prices.
KLJ CEO Niles Hushka characterized some of the takeaways from the study for Bakken Magazine as including the fact that it is a misconception that Bakken producers are making a lot of money really fast. Hushka said that because the industry requires high capital investment (an average of $7.5 million/well in spud-to-completion costs), "the oil production business is not as profitable as people think." Data from the best oil-producing parts of North Dakota demonstrate that, Hushka said.
"Although some wells in the core of the Williston Basin offer a payback of roughly six months to two years, wells outside of the core take much longer to pay off," he told the magazine.
The KLJ study showed some models in which wells in some areas were profitable at $35/bbl. If oil prices turnaround again and head upward, Hushka predicts other areas outside of core producing areas will start to pick up.
Under current regulations and policies, roughly 20% of the Williston Basin is restricted from development, and one third of the state's oil production continues to come from federal lands at the Fort Berthold Reservation, according to the report.