The big oil companies are often the last ones to catch on to big changes. It was a medium-size independent oil company that pioneered a combination of horizontal drilling and hydraulic fracturing to tap enormous shale gas for the first time.
Here in North Dakota and neighboring Montana, it’s been a similar story. Small to medium-size companies applied the same technique to unlocking oil in the Bakken formation, a geological layer rich in oil that had not yet migrated to conventional reservoirs. Now some companies are tapping into other formations in northwest North Dakota, including the Three Forks or Pronghorn.
The biggest players are independent companies like Continental Resources, an Oklahoma firm that has more acres under lease in the Bakken formation than any other company; EOG, formerly Enron Oil and Gas, whose crude oil and condensate output soared 52 percent in 2011; and Whiting Petroleum, a Denver-based independent company whose oil production has more than doubled since 2007 and whose stock has quadrupled since it went public in 2003.
Among the major companies here, Hess is the biggest because it acquired acreage back in the 1950s after conventional oil was discovered in North Dakota. The other major companies are all playing catchup, many of them by buying up smaller firms as Exxon Mobil did with independent XTO Energy.
On Tuesday, June 26, Rick A. Ross, Whiting’s mild-mannered vice president of operations, took time to discuss the company’s operations in North Dakota. Back in 2003, when Whiting was spun off as a separate company, it had just eight employees in the state. The method of tapping the Bakken wasn’t yet known. Today the company has more than 200 people working in North Dakota, not counting all the contractors with drilling and other service and construction companies. It has 20 rigs drilling wells.
At first, companies explored Elm Coulee in eastern Montana. Whiting tried applying the technique in its Sanish field near Stanley, N.D. It got mixed results. It tried different drilling techniques and results improved.
Today, companies drill as many as six wells from one drilling pad, instead of one. The holes go down 10,000 feet then turn horizontal and travel out about two miles to suck up oil from the formation. They use rubber “packers” around their pipes to make it easier to sub-divide the well and get more oil out of each one. Modern drills “allow us to put the well right where we want it to be,” Ross said. To bring costs down, Whiting has gotten contractors to reduce drilling time from 30 or 40 days down to 17 or 18 days (and in one case, just 11 days).
Whiting is considered one of the better operators in the area, according to ranchers and others. But it still faces many of the same issues. To house workers, it has snapped up rooms for the next two years at a hotel that was bought by a contract firm. Even so, it will need more accommodations.
Like other companies, it has found natural gas alongside oil yet doesn’t have the gas-gathering infrastructure to capture it all. Overall, oil producers burn off, or flare, 34 percent of the gas they get; Ross says Whiting flares only 20 percent.
To capture more, Whiting is building additional gas processing plants and pipelines. But Ross notes that a gas gathering network can cost $200 million or more and take 18 to 24 months to go from decision to having steel pipes in the ground taking gas. “The timing disconnect is something folks don’t realize,” he said. Some North Dakota politicians have begun talking about slowing down the drilling craze until infrastructure can catch up, but if there is any slowdown here it will happen only if the price of oil plunges.
Whiting, like all companies in this area, uses 30,000 to 40,000 barrels of fresh water to frack each one of its wells. Then it gets rid of the wastewater that comes back up by injecting it back into the earth. Ross says it is difficult to recycle because of its high chloride content. Last year, the Environmental Protection Agency complained that Whiting had violated the Safe Drinking Water Act by reporting inaccurate wellhead injection pressure data to the EPA for one well. Whiting and EPA settled and Whiting paid a civil penalty of $120,000, according to the company’s annual report.
Also like other companies, Whiting has trouble arranging pipelines, trucks and rail cars to carry its oil to market. It is building some pipelines of its own to connect to interstate lines.
Ross took us around in search of photo opportunities, but it was slim pickings. Aside from rigs, the capital-intensive oil industry isn’t terribly photogenic. We saw a couple of drilling rigs at work. After a well is drilled, however, it gets only a few people for maintenance and monitoring. Next to one well near Whiting’s office sit big tanks where oil is stored. There we met Mitch Calhoun, a 27-year-old who monitors the tanks. Every inch of change in the level of the oil in the tank, he says, equals 1.67 barrels of oil. That well had produced about 200 barrels that day, Calhoun said. If Whiting can make $50 a barrel after royalties and costs and transportation, that well would bring in $3.6 million a year. It all adds up.