Ashanti Gold Corp. GULSF

A good read on this Bakken play

[hockeytown]

Heavy Oil and Oilsands

January, 2009

Source: Profiler

Technology Unlocks Bakken Potential In Saskatchewan

By Elsie Ross

For more than 100 years, the endless prairie of southeastern Saskatchewan was identified with agriculture: the vast wheat fields which helped to feed a hungry world.

Today, thanks to new technologies, that once-quiet corner of the province is helping to meet the insatiable global demand for a different commodity: sweet light crude oil, which at 41 degrees api is about as good as it gets.

In the past four years, the Bakken formation has become synonymous with Canada's hottest new oil play and has rejuvenated service centres such as Estevan and Weyburn. And while the Saskatchewan government acknowledges it could see a reduction in activity with the recent collapse in the price of oil, it is still optimistic about the prospects for next year.

"It clearly is an exceptional find and there is definitely opportunity yet," said Bill Boyd, Saskatchewan's energy and resources minister. The high-quality oil combined with high oil prices and success with new technology set off a land sale buying binge in the southeast over the past two years. Bonus payments to the province soared over the first 10 months of 2008 to $876 million on 443,023 hectares of rights sold in the southeast, up from $180 million over the same period in 2007 and only $73 million in 2006.

Another 172 parcels in southeastern Saskatchewan were on offer in the December 8 Crown land sale and it was likely many of those were prospective for the Bakken, he suggested.

The Saskatchewan government also has been noticing that the reach of the play has been expanding, primarily to the west and south. That isn't surprising as the earliest Bakken development was in the Montana and North Dakota portions of the Williston Basin, which extends north into southeastern Saskatchewan and southwestern Manitoba.

Considered an extensive regional resource play, the Bakken is a "tight" oil play with the oil contained mostly in siltstone and thin sandstone reservoirs with low porosity and permeability that require extensive fracture stimulation before yielding their treasure.

A recent (April 2008) United States Geological Survey assessment estimated that the Bakken formation in Montana and North Dakota holds between three and 4.3 billion bbls of undiscovered, technically-recoverable oil - up from the agency's 1995 estimate of 151 million bbls. How much of that is economical to recover will be known over time.

With an estimated 25% of the 500,000- square-kilometre Williston Basin in Saskatchewan, there could be an estimated 25 billion to 100 billion bbls of Bakken oil in place in the province, according to Ed Dancsok, director of the geology and petroleum lands branch for the Saskatchewan Ministry of Energy and Resources. The big question mark, though, is whether the Bakken is evenly distributed throughout the basin, he acknowledged.

The first commercially successful Bakken wells were established in 2000 at the Elm Coulee oilfield in Richland County, Montana, and within three years the state's oil production had doubled. The story is similar in North Dakota where the Bakken continues to attract strong interest from operators. By the end of 2007, about 105 million bbls of oil had been produced from the Mississippian-aged Bakken.

In Saskatchewan, Bakken wells at Viewfield were drilled in 2004 by Bison Resources Ltd. The company was acquired by Mission Oil & Gas Inc., which was in turn acquired by Crescent Point Energy Trust, currently one of the three major players in the Bakken (along with TriStar Oil & Gas Ltd. and Petrobank Energy and Resources Ltd.).

Advances in horizontal well techniques that offer maximum exposure to the reservoir, coupled with the application of new fracturing and completion technologies, have been the key to unlocking the economics of the Bakken. Petrobank pioneered the use of the Packers Plus StackFrac system, which has become the industry standard in the Canadian Bakken.

"I'd say the single biggest thing has been the whole StackFrac concept, which is the driving force behind placing the proppant and the frac fluid in exactly the right spot and in exactly the right proportions in the exact right pressure that maximizes the hole you have open," John Wright, Petrobank's chief executive officer, said in a recent interview with Nickle's New Technology Magazine. "The impact on the economics is suddenly we could drill wells and complete them essentially for the same capital investment that we used to be making but they came out at much better initial flow rates and, in particular, much lower initial water cuts."

As of mid-October, Saskatchewan had 1,050 wells capable of producing in the Bakken. Of these, the vast majority (979) have been drilled since October 2004. Over the first eight months of 2008, the Bakken accounted for about 8.6 million bbls (an average of 35,250 bbls a day) of Saskatchewan's oil production of 105.7 million bbls (approximately 434,000 bbls a day).

In 2007, operators drilled 292 Bakken wells (269 horizontal and 23 vertical). To mid- November of this year, about 600 wells targeting the Bakken had been drilled. Although a breakdown isn't yet available, the vast majority would have been horizontal wells, according to a government spokesman.

Operators such as TriStar, with current production from the Bakken of more than 4,700 BOE per day, are continuing to focus on improving potential primary recovery factors in the play. In the second and third quarters of this year, the company drilled several shorter horizontal wells (approximately 600 metres compared to 1,400 metres for full-length horizontals), while continuing to fracture stimulate the wells using the same number of fracs as full-length wells. This technique reduces the inter-fracture distance and increases effective reservoir contact per metre of horizontal wellbore. Early production results from these shorter length wells are very encouraging with initial production very similar to what would be expected from longer-length horizontal wells, according to the company.

TriStar has drilled 10 (6.5 net) of the shorterlength wells with the oldest on production for more than eight months.

TriStar's current oil reserve booking is based on a recovery factor of 1.1% of the estimated net total original oil in place. Achieving a primary recovery factor of 12.5% consisting of four wells per section at current average reserve engineer bookings would yield up to 70.5 million bbls of additional recoverable oil to its current booked reserves, the company has calculated.

TriStar has set a $285-million budget for 2009, of which two-thirds will be spent in southeast Saskatchewan including $165 million for the Bakken. Spending will include construction of key infrastructure to support the company's significant development plans for the area. TriStar has more than 235 (155 net) sections of development and exploration lands on which it has identified more than 813 (549 net) Bakken drilling locations.

Crescent Point's Bakken technical team conservatively expects over time it could achieve a 15% recovery factor on primary production, based on detailed simulation work that suggests up to 19% recovery with infill drilling at eight wells per section. Crescent Point, with its privatelyheld offshoot Shelter Bay Energy, holds about 600 sections of land in the play, making it the largest landholder in the Bakken.

Another option is enhanced recovery with water or carbon dioxide (CO2) floods. Crescent Point is in the early stages of determining how best to apply water and/or CO2 flooding to the formation with the objective of increasing its recovery rate to as much as 25-30%.

While the major players staked out their claims fairly early, the Bakken also is seeing a growing number of smaller companies eager to get in the game. Medicine Hat-based Reece Exploration Corp. is exploring the edges of the play, to the west and north of the heart of the play at Viewfield.

In the third quarter, it drilled two (one net) wells with the final exploratory well drilled in its Montmartre play currently undergoing testing. Reece's first delineation well was drilled in the Bemersyde area (near its first successful Bakken exploratory well), and initial test results are positive.

The company acquired an additional 1,920 (960 net) acres of land in the October land sale, increasing its land position in the Bemersyde play to 7,680 (3,840 net) acres. Additional delineation wells are planned to establish the pool extent after all testing and fracturing is complete and production has been established for the existing wells.

Reece has also participated in Bakken wells in the Forget field and is part of a four-well project in the Stoughton area. Another new entrant, privately-held Wild River Resources with partner TriAxon Resources Ltd., is working on the new Greater Flat Lake play, just north of the United States border at 15-14-01-16 W2M. "We think we've got a relatively significant discovery that will extend a new Bakken play over a township and a half to two townships," said Neil Roszell, Wild River's president and chief executive officer. "We're quite encouraged by this one."

Vancouver-based Ryland Oil Corporation has recently begun the transition from Bakken exploration to development following a multi-well drilling program in the Roncott area. Its first Bakken well has come on production at rates of 90 bbls of oil per day to 120 bbls a day with a current oil cut of 45%. The company has also conducted an evaluation program of the Bakken to the southeast and has identified a number of areas in which it will continue to focus its drilling.

TriAxon has farmed in on Ryland's land and is to begin drilling the first of three earning wells, the Hoffer 13-33-1-14 W2M horizontal well in the southeast corner of Ryland's acreage, by mid-December.

And while the Bakken still accounts for only about eight per cent of Saskatchewan's oil production, Boyd is confident it has nowhere to go but up as operators continue to find new ways to increase recovery rates and newcomers continue to push the boundaries of the play. "Absolutely, it's great for the province," he says.

Get your shares while there still cheap.

hockeytown