Increased oil estimate could boost investor confidence

Updated USGS survey predicts twice the oil previously thought held in Williston Basin

BY KRIS BEVILL

The U.S. Geological Survey’s recently updated assessment of oil and gas reserves believed to be contained in the Williston Basin predicts that the region contains twice as much oil and three times as much natural gas as was estimated in 2008. It now believes there are approximately 7.4 billion barrels of technically recoverable oil and 6.7 trillion cubic feet of undiscovered natural gas in the basin.

The significant increase in estimated recoverables is due to the inclusion of the Three Forks Formation in addition to the Bakken Formation, according to the USGS. When the 2008 survey was conducted, little data existed on the Three Forks Formation and it was believed to be unproductive, the agency stated. However, new drilling delivered a new perspective on the formation’s potential, thus leading to the updated estimate.

The updated government assessment likely came as no surprise to the oil and gas industry, which has been building out its infrastructure for a long-term play for several years already, but it could provide muchneeded reassurance for investors and developers who may be skittish about participating in an oil boom area.

Sen. John Hoeven, R-N.D., said he asked the Interior Secretary to conduct a new survey more than two years ago, with the goal of stimulating more private investment activity in the region to support its growing needs. He expressed satisfaction with the survey results and suggested that if the industry is right, even the high end of the USGS assessment — 11.4 billion barrels of oil — could prove to be low. “This is clearly great news for North Dakota and great news for the nation, and we believe it is a conservative estimate, based on industry assessments,” he said in a statement. “This new USGS study further confirms and reinforces the fact that the Williston Basin is a sustainable, long-term play warranting strong private-sector investment for decades into the future.”

Dean Bangsund, a research scientist at North Dakota State

University in Fargo who has conducted a significant amount of research on the Williston Basin, agrees that the updated USGS assessment is not news for the industry, but provides investors and developers with clarification on the longevity of the activity. “I think that is absolutely critical for the proper flow of investment dollars,” he says. “They need to understand the duration and magnitude of the development and they need to be able to understand what the uncertainty and risk is. I think having the USGS come out and publicly state what they think the numbers are, even if the industry already knew it, it’s important for them to get that information.”

Bangsund says the updated assessment also highlights the tremendous economic opportunity facing North Dakota and should be addressed appropriately. “The economic output from the Williston Basin is likely to continue, which means we’re going to continue to have strong employment in the state, strong business activity, opportunities for new businesses,” he says, adding that it also indicates a long-term, sustainable source of state revenues generated from oil and gas output. But the most significant takeaway for the state, he says, should be the realization that it needs to collectively address the infrastructure needs in western North Dakota in order for the region to handle its bigger economy. “It isn’t just a function of putting homes in; we also have to put in parks, golf courses,” he says. “We have to make sure that the support services that go with that workforce are there. All of that has to be built up to handle a much larger economy in the western part of the state. At the same time, the state can’t ignore that we’re growing elsewhere as well. We have those development concerns that we need to address long term in the state.” PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

Data provided by David Flynn, chair of the University of North Dakota Department of Economics. Reach him at david.flynn@business.und.edu.