Bakken Formation Oil: Yee-Haw, Etc.

By April 13, 2008Energy

The U.S. Geological Survey’s release last week of a new study estimating some 3 to 4.3 billion barrels of recoverable oil is indeed good news, but, no disrespect to the good people at the USGS, it’s just a study.

It takes investment, ingenuity and innovation to get to the oil. In other words, it takes the oil companies and profits. And exploiting a find is still a 50-50 proposition, profitwise.

Bob Harms of the Northern Alliance of Independent Producers points out the economic realities:

Being able to recover oil technically is different than being in business long enough so can recover it.” Harms says it costs six million dollars to drill a well

And even with $110 barrel oil there are some wells in the Bakken that don’t break even

(Bob Harms) “If you exclude the sweet spot in Parshalll and Mountrail area – 52% are not going to produce an economic well. Meaning they will not return the investment it took to drill it.”

Investor’s Business Daily made similar observations in a recent editorial. In a typically tough IBD editorial, the paper took to task those elected officials who welcome available oil in North Dakota but who vote against accessing needed energy in the Alaskan National Wildlife Refuge or off America’s coasts, or who would institute a windfall profits’ tax.

Yes, oil companies make money. But they spend more than they make on finding new sources of oil. A new Ernst & Young study shows the five major oil companies had $765 billion of new investment from 1992 to 2006 compared with net income of $662 billion.

Over the same stretch, the industry — which includes 57 of the largest U.S. oil and natural gas companies — had new investments of $1.25 trillion compared with a net income of $900 billion and a cash flow of $1.77 trillion.

This is an industry that has redefined innovation, reinvesting profits to find innovative ways to recover oil and gas wherever they find it. This includes fields once considered “dead,” vast tracts miles beneath the ocean surface, and sands or even shale in North Dakota.

So that’s the context. Touting potential oil resources is fine, but ultimately pointless if you demonize or undermine the energy companies that bring that resource to market.

Join the discussion One Comment

  • John says:

    I have had some longtime interest in the bakken oil issues. Can you tell me specifically what companies are drilling and/or pursuing the Bakken oil?

    Thank you in advance,


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