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Bakken Shale Play – A Key Driver in the North Dakota Economy

Although North Dakota began producing oil in 1951, the state’s shale boom began in 2007 after the discovery of the Bakken Shale Play.  The shale formation extends over parts of North Dakota, Montana, and Saskatchewan, Canada – and there is an estimated 24.3 billion barrels of recoverable oil in the U.S. portion of the Bakken alone.

The discovery of the Bakken Shale Play has made a big impact on North Dakota’s economy.  The small towns in the Williston Basin prairie, the site of most Bakken oil and gas operations, are experiencing a huge population growth, with 23,000 new permanent residents since 2007. Oil production in North Dakota is expected to increase, which will both boost the economy of the area and create a long list of needs to support the new population and expanding industry presence.

Bakken’s Potential Yield

North Dakota is now the third-highest oil producing state in the United States.  In 2011, just four years after the discovery of the Bakken Shale Play, oil production in the North Dakota part of the Bakken accounted for 87% of total oil production in the state.  Oil production in the area has increased from 3 Mbbl/d (million barrels per day) in 2005 to over 400 Mbbl/d in 2012.

The higher oil yield is partly due to two main factors:  First is the increased number of wells.  In the past 10 years, the number of wells in the Bakken has gone from 3,110 to 5,091, and secondly oil bbl/d per well has gone from 28 to 70.

Operators in the Bakken Shale Play are also, on average, drilling more days out of the year than they were just two years ago.

Increased drilling requires more workers, more equipment, and more money, and this cash flow has significantly stimulated North Dakota’s economy.

Economic Impact of the Shale Boom

Williston, North Dakota, which is at the heart of the Bakken’s oil production, is the fastest-growing small city in the United States.  It grew 8.8% from April 2010 to July 2011 and has grown 40% since 2000.  Dickinson, North Dakota and Minot, North Dakota are also in the top eight fastest growing cities.  The region around the Bakken Shale Play is also growing because the oil industry is creating jobs.  The unemployment rate in Williston is 0.8%, compared to a national rate of over 8%, and household income in Williston increased from $29,688 in 2000 to $55,000 in 2010.

North Dakota’s state revenue hit $139 million in February 2012 – as compared to only two years earlier, when the revenue was $25 million.  The state is using the new revenue to fund infrastructure in quickly growing areas. Additionally Williston and surrounding communities are facing a housing shortage as thousands of permanent and temporary workers flood the area.  According to the latest projections by

the North Dakota Housing Finance Agency, an estimated 9,000 new single or multiple family homes will be needed in the next 20 years.

Critical Long-Term Needs

In order for oil and gas production to continue increasing in the Bakken Shale Play region, several critical long-term needs must be met.  In addition to more housing and better infrastructure, North Dakota needs pipeline expansions.  Current pipelines are not expected to keep up with oil capacity until 2013, so railroad short lines have been set up to provide a “pipeline on wheels” to transport oil.

Meeting these future needs will require continued funding and oversight by the state government, but will also continue to create more jobs in the area, making the Bakken Shale Play economically viable for years to come.

Clover specializes in placing professionals in the oil and gas industry. If you are an Operator seeking to augment Project Teams, contact Jeff.W@clovergs.com

If you are an experienced professional looking for opportunities in the Upstream Industry (Alaska, Eagle Ford Shale Play, Bakken Formation, Deepwater Gulf of Mexico), send your resume in complete confidence to Chris.S@clovergs.com 

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