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2 Jul 12 2012 @ 10:55am by Matt Smith in Crude Oil, Economy, Global Energy

Bakke(n) to Basics

We are well aware of the natural gas shale revolution, as domestic production remains strong while prices have remained mired in the land of 2-buckdom. However, the next revolution is underway, set to blow the doors off production expectations in a similar fashion. This be…the US oil shale revolution.

So through the poster-boy of  this new revolution – the Bakken Shale in North Dakota – let’s look at some startling statistics which highlight its growing impact on both a regional and national scale.

1) North Dakota has just passed Alaska to become the second largest oil-producing state in the US. It produced nearly 640,000 barrels a day in May, which is more than Opec member Ecuador, and is now targeting Opec member, Qatar (at 750,000 barrels a day)

2) Such is the oil boom in North Dakota that its unemployment rate is at a four-year low of 3% (versus the national average of 8.2%), while the unemployment rate for Williams County is at a crazy-low 0.7%

3) One third of all natural gas produced in North Dakota is flared, because there just isn’t the infrastructure in place to deal with it

4) There is such strong demand for energy jobs in North Dakota that Williston restaurants are finding it nigh on impossible to recruit staff. Case in point, McDonalds not only offers a signing on bonus, but workers also get paid up to $25 an hour. Given the limited staffing at restaurants, the waiting time to be seated averages an hour, while some restaurants only have the drive-through open

5) The below chart from Rystad Energy shows the breakeven costs for oil shale plays. The moral of the story is that as long as Bakken prices stay above $60 a barrel (to cover the cost of transportation out of the region…current price is $80-ish), oil production is economically viable. Other shale plays are somewhat higher, however:

6) Strippers are leaving Las Vegas and heading to Williston, ND, because there’s better money to be made

7) These pictures show the hub city of the Bakken shale – Williston, ND – in the midst of a modern day goldrush oilrush

8) The Williston General Motors dealership is indicative of the sudden wealth in the area, becoming the No. 1 seller of Corvettes in the upper Midwest

9) The Bakken shale is currently the largest oil shale play in the US, although the Permian Basin plays and Eagle Ford are expected to be the growth story of 2013, producing at a more similar level to Bakken. Estimates predict US oil shale plays will produce between 1.6 – 2 million barrels a day next year

10) Rent in Williston currently ranges from $2,000 for a one-bedroom apartment to $3,400 for a three-bedroom apartment.

I’m thinking I’ll do a further post on the topic of oil shale, given its growing prominence. But for now, I hope this has been a useful intro. Rock on!

2 Comments on this post:

  1. Chtote says:

    Thank you for interesting article.
    Can you, please, to answer – are prices includes 15% profit, or production cost of only?

    Best regards

  2. Matt Smith says:

    Thanks – am glad you liked the piece!

    Prices are based on an internal rate of return of 10%. There is no profit involved in this number. The biggest consideration is that it takes $10 – $20 to transport oil from Bakken to refineries, so as long as Bakken + transport is less than WTI, it is profitable.

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