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north dakota the hottest oil play

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    Another article from the Minot Daily News

    Mineral resources head says N.D. is in an oil boom

    By ELOISE OGDEN, Regional Editor, [email protected]

    The year has barely started and North Dakota already is heading for a booming year in oil activity, according to Lynn Helms, director of the North Dakota Industrial Commission’s Department of Mineral Resources.

    Only one month into the new year and already 90 permits to drill have been issued by the N.D. Oil and Gas Division, said Helms. “If that pace keeps up, we will issue over 1,000 permits in 2008, which is more than double 2007 and could come close to the record 1,098 issued in 1981,” said Helms.

    The N.D. Oil and Gas Division, a division of the N.D. Department of Mineral Resources, regulates the drilling and production of oil and gas in N.D.

    Helms, a Williston resident for a number of years, is a native of Harding County, S.D. He was raised on a cattle ranch 20 miles east of Buffalo.

    He knows the oil and gas industry very well.

    He earned his bachelor of science degree in engineering from South Dakota School of Mines and Technology in Rapid City, S.D., in 1978. His oil-field career began as a roughneck in 1976, working summers and school holidays.

    “My rough-necking years were spent in the Dickinson area, initially on a small uranium exploration rig and then on some big rigs in the Medora, Little Knife, Dickinson area,” he said.

    After graduation he worked two years as a production engineer for Texaco in all of the producing areas of Montana. In 1980, he joined Amerada Hess in Williston. While in Williston he worked as a production engineer, reservoir engineer and asset team leader on projects in Abu Dhabi, the capital and second largest city of United Arab Emirates, and also in Alaska, Arkansas, Louisiana, Mississippi, New Mexico, North Dakota, Texas and Wyoming.

    “I had the privilege of working in a lot of places on a lot of different kinds of oil plays during my 18 years with Hess and living in Williston,” Helms said.

    Helms served as director of the North Dakota Industrial Commission Oil and Gas Division since July 1998. He has been director of the Department of Mineral Resources since July 2005. The department includes the N.D. Oil and Gas Division and the N.D. Geological Survey.

    An oil boom

    North Dakota’s definitely in an oil boom, Helms said.

    “Bowman County continues to produce at very high rates from the giant Cedar Hills waterfloods while Dunn, McKenzie and Mountrail counties are booming with Bakken drilling,” Helms said.

    Bakken studies soon released

    There has been much talk about a study of the Bakken Formation that was never completed by the late Leigh Price, a geologist. Price died before he finished the study.

    “The Leigh Price study is near and dear to the hearts of DMR (Division of Mineral Resources) geologists,” Helms said. “Julie LeFever worked with Leigh on many parts of his study and the bulk of the data used in the various Bakken studies over the years came from the North Dakota Geological Survey. Our core library is one of the most complete in the world and those who set it up and maintained it over the 55-plus years of oil and gas drilling in North Dakota should be commended for their vision and wisdom.

    “It is my understanding that the USGS (U.S. Geological Survey) does not plan to finish and publish the Leigh Price study. They are in process of completing a new resource assessment using their standard approach for unconventional oil and gas plays,” Helms said.

    He said he believes USGS hopes to release the Bakken assessment this month or in March and the rest of the Williston Basin assessment will be released by the year’s end.

    “We at DMR are doing an independent assessment and plan to release it at the conference in Minot April 27-29, said Helms, referring to the Williston Basin Petroleum Conference and Prospect Expo.

    Helms said there is a great deal more data available today than when Price did his study so a lot of new information should result.

    “But the basic idea Price had about nearly all of the Bakken oil remaining in the Bakken (earlier scientists thought it migrated out into the shallower oil and gas fields produced since the 1950s) is being shown to be true. The new reports should provide a great deal of encouragement to the oil and gas industry about how gigantic the Bakken oil resource is and therefore, the economic prize of improving recovery from that resource through technology breakthroughs,” Helms said.

    Mountrail today

    Mountrail County is considered a major hot spot for oil activity.

    “Mountrail County is pretty well leased up, but there are still two to three companies that have established lease positions and plan to start drilling programs soon,” Helms said.

    He said several new companies are establishing lease positions on the Fort Berthold Reservation and hopefully, drilling will get going in a big way soon.

    He said the companies that are already drilling in Mountrail plan to add several rigs this year. “We think that Mountrail County will go from 19 to 20 rigs drilling now to around 35 by mid-year,” Helms said.

    Helms said the drilling is definitely moving north and a new operator has leased about 150,000 acres northeast of Parshall with plans to begin drilling soon.

    “The Bakken rocks exist east and north of Minot but the risk will be much higher since the formation hasn’t been deep enough and hot enough long enough to begin generating oil, so oil will have to have migrated into the area from the south and west. There is some evidence of that due to oil production from the rocks right below the Bakken in southeastern Manitoba,” Helms said.

    Frequent questions

    Helms frequently speaks to groups about the oil activity in North Dakota. He said when people ask him questions about it, most want to know about spacing 640 versus 1,280 acres.

    “The Bakken Formation varies tremendously from one area to another so a variety of well spacing is needed to efficiently and effectively produce it,” Helms said.

    He said people also frequently ask him about flaring the natural gas. “Some flaring is necessary the first year to year-and-a-half so the companies can determine the gas reserves and properly design and build gas-processing facilities.”

    Helms said oil price differentials are always a concern of people. “And they have increased this winter but are much lower than in early 2006,” he said.

    He said another question he often gets is people wanting to know why it’s taking a long time for them to get royalty checks.

    “The law in North Dakota requires a well be spaced and the spacing unit pooled before royalty division orders can be issued and payment made. If payment is delayed more than 150 days, interest must be paid on the money due,” Helms said. He said there is a severe shortage of title attorneys in the state so the work is backing up. “With so many rigs running and such large spacing units the number of mineral owners is very large and the title works very complex on every well,” Helms said.

    Helms noted that national media has taken an interest in the Mountrail County oil activity and had stories about it. “And JP Morgan is writing articles about how this development will have a big effect on publicly traded company stock values,” Helms said.

    Helms said he’ll have a better idea how the oil development in North Dakota is being viewed nationally, including in the Bakken Formation in the Parshall Field, when he returns from the North American Prospect Expo being held in Houston this past week.

    “But I have been hearing that this is the hottest play in North America right now,” Helms said.

    Hottest oil play on continent

    On Friday afternoon, while on his way home from the expo, Helms confirmed, in an e-mail to The Minot Daily News, what he has been hearing. “We are the hottest oil play on the continent,” he said. He gave an example of the interest in N.D. at the expo. He said a woman who came by their booth at the expo “wanted to know what is going on in North Dakota and why everybody who stopped at her booth asked if she had any North Dakota acreage or Bakken acreage.”

    Helms said it is interesting that Cedar Hills (Bowman County, Red River formation) and Elm Coulee (Richland County, Mont., Bakken) are No. 19 and 26 in the list of the top 100 all-time U.S. oil fields. “We at DMR believe the Parshall, Sanish, Ross, Stanley-play will be as large or larger than Elm Coulee,” he said.

    For the director of the N.D. Mineral Resources Department, he has the prime spot for keeping an eye on the developments in North Dakota and the future of the oil and gas industry in this state.

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