What’s the difference between the Bakken and Saudi Arabia’s largest oil reserve? About 50 billion barrels and 13,000 square miles, reports Bloomberg Business.
Saudi Arabia, the world’s largest oil producing country, and its Ghawar oil field is a daunting prospect for many U.S. shale oil drillers. Ghawar is the largest conventional oil reserve in the world, and its narrow, deep oil deposits trapped in porous limestone are a closely guarded Saudi state secret. As reported by Bloomberg, University of Utah geology professor Rasoul Sorkhabi estimates that this field alone contributes approximately 60 percent of overall Saudi oil output.
Being such a large reserve, the formation’s production has the power to drive prices up or down depending on current market conditions. If prices are too high the Saudis open the faucet and dump product onto market. If prices are too low, production is decreased. Lately, though, the country has been allowing the oil to flow freely in attempts to drive U.S. shale drillers out of business. According to figures Saudi Arabia submitted to OPEC, the country produced a record breaking 10.6 million barrels per day in June.
The conventional Ghawar formation, discovered in 1948, only covers an area of 2,000 square miles, but the remaining reserves are estimated to contain approximately 74 billion barrels. The formation’s average production is reported to be 5 million barrels per day. In comparison, the Bakken formation, discovered in 1951, is sprawled out across 15,000 square miles, and its remaining reserves contain about 25 billion barrels. Currently, average daily production of the formation is 1.3 million barrels.
Oil and gas producers in the U.S. don’t have it so easy, however, as the unconventional Bakken region in particular is a different beast altogether. The reserves are trapped in dolomite, a sedimentary carbonate rock. As described by Bloomberg, the formation is a “shallow lake of oil sprawling under the Great Plains for hundreds of miles.” Tapping into the Bakken requires utilizing the costly process of hydraulic fracturing. While oil in the Saudi Ghawar formation is produced from existing wells for $5 per barrel, North Dakota state data reports that new wells in the core of the Bakken break even at $29 per barrel. To keep a balanced budget, though, Saudi Arabia needs oil prices to stay around $89 per barrel.
So the question remains, will operators in the Bakken and other U.S. shale plays still be able to produce at a profit? The ability of American producers to weather the storm of the recent price collapse suggests an overwhelming yes. Despite the high cost of horizontal drilling and hydraulic fracturing operations, companies are becoming more efficient and capable of maintaining output with far less than before. Compared to a year ago, wells are being drilled in less time and with less manpower. As companies continue to innovate and reduce operating costs, U.S. producers are sure to give the Saudi’s low-price oil faucet a run for its money.