Bakken vs. Eagle Ford: A tale of two shales

Two plays driving a U.S. oil renaissance have very different economics

April 25, 2012

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Growing production from the Bakken tight oil play bears some responsibility for a supply glut at the Midwest crude oil hub of Cushing, Oklahoma. The glut is forcing producers in the oil sands to take steep price discounts in the United States for their landlocked product. But another unconventional play is also contributing to the U.S. oil production renaissance – the Eagle Ford.

Mirroring what’s happening in the Bakken, oil production has skyrocketed in this Texas shale basin due to advances in horizontal drilling and hydraulic fracturing. But unlike the Bakken, Eagle Ford producers have easier access to Gulf Coast refineries. What follows is a peek at two plays that are keeping U.S. pipelines full and driving a sector-wide push to build more.

Bakken

Eagle Ford

The Bakken shale formation encompasses North Dakota, Montana, Saskatchewan and Manitoba. Production from the U.S. side of the Bakken crossed the 500,000 barrel per day (bpd) mark in November of 2011. Drilling activity is so feverish here that by 2015 production is expected to grow further – although the estimates vary, from 600,000 bpd to 1.2 million bpd. Either way, that’s a lot of oil. This shale formation extends across south Texas from the Mexican border. According to BENTEK, an oil data analysis provider, Eagle Ford production isn’t far behind the Bakken. It crossed the 400,000 bpd threshold at the end of 2011, and BENTEK forecasts production reaching over one million bpd by 2016.
The U.S. Geological Survey (USGS) in 2008 revised its estimate of undiscovered, technically recoverable reserves for the U.S. portion of the Bakken to 3 – 4.3 billion barrels. That was a huge increase from the USGS’s 1995 estimate of 151 million barrels, which is why some industry watchers think the USGS’s estimates are too bullish. The reserve potential of the Eagle Ford is not quite in the same class as the Bakken. In 2010, the United States Geological Survey estimated the undiscovered oil reserves in the Eagle Ford shale at a mean of 853 million barrels. EOG Resources, one of the largest producers in the play, says the estimated potential reserves of its assets are 690 million barrels alone.
Bakken crude will find a release valve when Enbridge Inc.’s 145,000 bpd Bakken Expansion project comes online in 2013. TransCanada Corp.’s Keystone XL project would add new takeaway capacity. Rail is increasingly being used to take Bakken crude to market. By year-end 2012, rail takeaway from the Bakken will total 725,000 bpd, Platts Energy says. Eagle Ford production that can’t be shipped by pipeline is trucked to Texas refineries. But new pipelines are in the works and total proposed pipeline capacity into Houston from the Eagle Ford stands at 785,000 bpd. For Corpus Christi, Texas, the total is 1.23 million barrels per day. But that capacity outstrips even the most optimistic production forecasts for the play.
Most roads for Bakken crude lead to the U.S. Gulf Coast – the center of crude oil demand in the Americas. Proposed pipeline projects for Cushing to the Gulf Coast stand at approximately 965,000 bpd. If built, the new pipes would allow Bakken crude to compete with Nigerian, Mexican and Saudi Arabian oil on the Gulf Coast. Platts says Texas refinery demand for Eagle Ford shale crude is currently around 152,000 bpd and these consumption levels are expected to grow as production grows. Four terminal construction/expansion projects in Texas will also allow Eagle Ford crude to be shipped by barge or tanker to Louisiana refineries and compete with light, sweet crude imports for buyers.

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