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Bakken Oil Production

Increasing Interest in the Bakken's Production... and a Substantial Opportunity for Investors

Written by Keith Kohl
Posted February 7, 2008 at 5:04PM

Editor's Note: For more updated information on the topic, be sure to read Energy and Capital's resource page on the Bakken oil field.

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I have a feeling that you've heard about the emerging Bakken formation at one point or another recently. That's understandable. Quite frankly, I'd be surprised if you hadn't heard of it.

The Bakken oil play stretches across Montana, North Dakota and into Southeastern Saskatchewan. We're talking about some potentially massive reserves of oil, too. The amount of oil in place has been estimated between 271 billion and 503 billion barrels of oil.

Although that is only referring to total oil-in-place, a U.S. Geological Survey (USGS) field report released on April 10, 2008, estimated there are up to 4.3 billion barrels of undiscovered, technically recoverable oil on the U.S. side of the Bakken.

Okay, so how much of an oil boom are we talking about?

Oil Production in the Bakken

Even if we take the lower estimates, that's still a huge amount of oil, far more than the 36 billion barrels of oil believed to be in Alaska's North Slope.

Let's just say that North Dakota oil production has been growing significantly. Crude oil production has been strong, up to about 40 million barrels in 2006. That's roughly a 20% increase since 2004.

Although I wanted to keep the topic on the U.S. side of the Bakken play, it wouldn't feel right if I didn't briefly mention the Canadian part of the formation.

As you may have known, I feel the oil sands in Alberta are going to play a significant role in future Canadian oil production. But having said that, remember that the Alberta oil sands are highly viscous and must be heated in order to extract the oil. The process can become quite energy intensive.

Trust me, there's a world of a difference between the heavy oil in Alberta and the light sweet crude underneath the Bakken play in Southeastern Saskatchewan. Now that the Alberta government are implementing oil royalties, trying to dip into oil companies' pockets, Saskatchewan property is starting to look more attractive.

Don't be surprised to see an exodus of smaller oil companies looking to exploit the rich oil resources in the neighboring province.

Let's get back to the U.S. side of the Bakken formation, particularly in North Dakota and Montana. Ever since April's USGS survey, producers have been grabbing as much of the Bakken as possible. I think it's safe to say that oil production is going to keep rising throughout the next decade.

And believe me, this oil boom couldn't have come at a better time.

Peak Oil in the U.S.

I usually cringe whenever I think about U.S. oil production. Ever since peaking in 1970, production at U.S. oil fields has been spiraling downwards.

But this shouldn't be news to you.

In fact, I've talked about peak oil in the U.S. on numerous occasions with my Energy and Capital readers.

How far has production fallen?

According to the Energy Information Administration (EIA), we're producing roughly the same amount of oil than in 1947. As you can see in the chart below, U.S. oil production has been dropping steadily:

2-7-08 US oil production

Looking at U.S. oil production since 2001, the picture doesn't get much better. . . or does it?

Before we go any further, I want to show you our production. If you don't want to take my words for granted, you can check out the EIA's numbers here. Obviously U.S. crude production as a whole has been falling, down to 5.1 million barrels per day in 2006, but take a minute to see for yourself where our crude oil production is declining.

More importantly, however, note where production is increasing.

The two states that stand out the most (to me, at least) are Montana and North Dakota. I know what you're thinking, "If oil production peaked more than thirty years ago, why are we seeing an oil boom in these two states?"

Well, we have Bakken oil production to thank for that.

Investing in Peak Oil and the Bakken

So the question remains, "What do we do next?"

Look, growing interest in the  Bakken oil formation is going to drive up oil production in both North Dakota and Montana, and one thing is painstakingly clear.

In order to keep up with the industry, you can bet there's going to be a huge investment to boost their infrastructure. Pipelines are needed to transport the new production. North Dakota is even considering a new refinery.

For investors looking to into the action, several options are available. Remember, it's not just the individual drillers who stand to gain in the Bakken. Many of my readers are already profiting off of these opportunities. Perhaps it's time to join them at the $20 Trillion Report.

Until next time,

keith kohl

Keith Kohl

Energy and Capital

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