Why Alberta’s Oil Could Be Less Relevant in One Month

In one month’s time, the U.S. Geological Survey is releasing a study of the Bakken Oil Formation (wiki), located in the Dakotas, which is said to contain 175-500 billion barrels of recoverable oil, at a cost of $20-$40 per barrel.

Next Energy News:

In the next 30 days the USGS (U.S. Geological Survey) will release a new report giving an accurate resource assessment of the Bakken Oil Formation that covers North Dakota and portions of South Dakota and Montana. With new horizontal drilling technology it is believed that from 175 to 500 billion barrels of recoverable oil are held in this 200,000 square mile reserve that was initially discovered in 1951. The USGS did an initial study back in 1999 that estimated 400 billion recoverable barrels were present but with prices bottoming out at $10 a barrel back then the report was dismissed because of the higher cost of horizontal drilling techniques that would be needed, estimated at $20-$40 a barrel.

The key figure here is the per-barrel cost of production. Using recent estimates from Canadian Oil Sands Trust, the company’s operating costs, plus royalties are $26.39 and $10.60, respectively, for a total cost of $36.99 per barrel.

Recoverability in the Bakken Oil Shale could leave Alberta suddenly less relevant on the world’s stage, especially if operating costs down south get the advantage of a declining US dollar.

Already, we’re seeing some activity in land acquisitions in the Dakotas, which could indicate some companies with the know-how are ready to reap the harvest.

Northern Oil and Gas, Inc. Announces Acreage Acquisition in Mountrail County, North Dakota

Oil prices of $100/barrel have drillers aggressively exploring North Dakota’s Bakken Shale. Despite impressive recent gains, Barron’s says shares of companies with stakes in the area still have upside potential.

U.S. Oil Driller Specializes In Going For The Hard-To-Get Stuff

Bakken oil formation has industry gushing

State of North Dakota Bakken oil Reserve Estimates

I guess we’ll see in one month what happens down south. In all likelihood, the cost estimates for the Bakken formation will be roughly on par with the oil sands, but, for the most part it will depend on the rate of technological change in oil shale extraction versus oil sands extraction.

In all, it just goes to show how one report could change the energy landscape in North America. Capital could be re-allocated from Alberta to the Dakotas in the blink of an eye, and change the nature of Alberta’s long-term prosperity with it.