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Bakken oil boom expected to last

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FARGO -- Eighty-five drilling rigs were burrowing in North Dakota's oil patch last week, each spending an average of $1 every second to pay costs including workers, fuel and electricity.

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"That's a pretty major investment in the North Dakota economy every minute of every day," said Lynn Helms, director of the state Department of Mineral Resources.

Oil and gas development contribute between $700 million and $900 million per biennium in revenues for state government, he said.

Together, the Bakken and Three Forks formations, located deep underground in western North Dakota, have an estimated 3.1 billion barrels of recoverable oil.

"That's probably conservative," Helms said, "but that's where we want to be."

Production now tops 230,000 barrels a day, and is forecast to approach 350,000 barrels daily this year, Helms said, then plateau within a few years around 400,000 barrels.

That forecast assumes the price of oil, which closed last week at $74 a barrel, remains above $60, a scenario Helms views as likely.

The number of drilling rigs could grow by midyear to 100 or 120, he said, with much of the activity in the Bakken, described as the hottest oil play in the continental United States.

And oil developers and state officials agree that active exploration and development of the Bakken and Three Forks formations appear sustainable.

Marathon Oil Co. of Houston has invested $1 billion so far to develop oil in North Dakota, with the intent of spending another $1.5 billion, said Dave Roberts, the company's vice president for exploration.

"I think there's a lot of potential here," Roberts said. Current technology allows recovery of about 6 percent of the oil, compared to 25 to 30 percent in west Texas and 50 to 70 percent in Louisiana, he said.

"Even if you double that," Roberts added, referring to the 6 percent recovery rate, "that's a tremendous amount of oil that I'm going to capture."

Continuing technological advances, which allow recovery of Bakken oil 2½ miles underground, will help to sustain a high level of activity, he said.

"Tremendous potential here," Roberts said. "There's a lot of oil in the ground."

"I think we're just scratching the surface on a lot of the technology," said Terry Kovacevich, Marathon's Bakken project manager, who is based in Dickinson, N.D.

It once took 60 days to drill an oil well in western North Dakota. Now it can be done in 15 days or less, Roberts said. Each well costs $2 million to $2.5 million to drill.

"These things are expensive," he said, adding that oil prices above $70 a barrel can sustain exploration.

Marathon representatives made appearances in Fargo last week to update activity in the Bakken formation, where an estimated 130 companies are operating, said Ron Ness, director of the North Dakota Petroleum Council.

Employment opportunities remain strong in the oil patch, with workers coming from the Rocky Mountain region, Kovacevich said.

"It's still challenging at times" to fill openings, "but it's getting better," he said.

More than 100 companies are hiring, with 150 to 300 workers needed, Ness said, adding, "We're going to see a lot of activity in 2010."

Challenges remain, including building roads and housing and providing services such as water supplies to support drilling. Infrastructure, in fact, is one of the factors that will restrain production at around 400,000 barrels a day in the near term.

Oil development in North Dakota now is much more predictable than it was during the boom that took place from 1978 to 1984, Helms said.

"There's much less geologic risk," Helms said, because the formation's footprint and layer now is well-known.

In the 1980s, only two or three of every 10 holes drilled struck oil.

"Now we don't get that many in a year," Helms said.

Still, uncertainty remains, he said, including oil price fluctuations and policy changes - anything from erasing tax credits to imposing a cost on carbon emissions - that could be made in Washington.

"I think this is absolutely a sustainable oil play," Helms said of the Bakken and Three Forks formations. Still, he added, "It's going to have ups and downs."

When asked to predict the price of oil, Helms often quips, "It's going to change."

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