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Bakken Shale Oil Boom Increases Opportunities For Energy Sector

News Link: http://www.bidnessetc.com/24714-bakken-shale-oil-boom-increases-opportunities-for-energy-sector/

Published: August 27, 2014 at 8:51 am EST
By: Micheal Kaufman

Oil production, in the North Dakota Bakken Shale, crossed the one million barrels of oil per day (bpd) level last month. The number of wells drilled in the region also went past the 15,000 mark for the first time. According to Bakken Shale’s official online platform, the Bakken Shale formation is estimated to have oil reserves of 400 billion barrels, and North Dakota is currently producing more oil than any other state in the US except for Texas.

Rise in drilling and production activities in the Bakken Shale has opened up more opportunities for existing oil service and transportation companies in the region. Baker Hughes Incorporated (BHI), Halliburton Company (HAL) and Schlumberger Limited. (SLB) are some of the active oil services companies currently working in the Bakken shale oil fields. On the other hand, oil transportation companies like Enbridge Inc. (USA) (ENB) will also observe a surge in revenue and investment.

Major oil companies, including Exxon Mobil Corporation (XOM), have operations in the Bakken Shale as well. Irving Oil Ltd., a Texas-based company, continues to make efforts to capture a significant position in the Bakken Shale. Its gross production from Bakken Shale increased by more than 81% year-over-year (YoY) to more than 59,000 barrels of oil equivalent per day (BOED) by the end of 2013.

One of the reasons why a lot of energy companies have been attracted to the North Dakota Bakken Shale is the availability of cheap crude oil. It leads to expansion of margins for not only integrated oil and gas companies but also refineries. The price of crude oil in the Bakken Shale formation was reported to be $84.65 per barrel on August 18; compared to $98.77 in the Eagle Ford shale, the largest shale formation in the country.

Rise in crude oil production levels, coupled with weak demand in the US, has caused WTI crude oil prices to drop. According to reports, the US refineries are producing near peak capacity, leading to excess supply of oil, and forcing prices down.

Moreover, crude oil import in the US has also declined by 17% year-to-date (YTD) to $20.2 billion in June 2014. Crude oil import contributes nearly 10% to the country’s overall imports. Thus, a fall in crude oil imports would ease the burden of the economy to some extent.

However, crude oil from North Dakota’s Bakken Shale has been subject to a lot of debate as oil extracted from this region is considered to be more flammable and thus dangerous. According to reports, the oil from the Bakken Shale has a higher sulfur content, which adds to its flammability and it is considered riskier to transport. In December last year, a major accident took place while carrying oil from North Dakota, which caused the Obama administration to revise oil transportation laws.

Critics believe that growth in oil production means greater investment in increasing oil transportation capacity and major pipeline projects to ensure safety. However, issues regarding oil spills continue to remain a matter of concern. For instance, ExxonMobil announced yesterday, that it would be paying a penalty of $1.4 million for the oil spill that took place in Louisiana. The company admitted the fact that around 2,800 barrels of crude oil was spilled, after a pipeline ruptured.