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2012/05/20

Alaska Cowers in the Shadow of the Shale Boom

It's official: North Dakota has  become the second-largest oil producing state.
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Alaska Cowers in the Shadow of the Shale Boom
By Keith Kohl | Sunday, May 20th, 2012
Keith Kohl

It was probably the easiest prediction we've made in the last decade...

When news came out earlier this week that North Dakota supplanted Alaska as our second-largest oil producing state, we couldn't help but smile and pat ourselves on the back.

North Dakota has rocketed past our largest oil producers, California and Alaska, in just a few years by developing their shale resources.

We've witnessed oil fever overtake the Midwest since 2008.

Today there are 209 drilling rigs plugging away beneath North Dakota's soil.

But it's more than just the Bakken that has propelled North Dakota past the Last Frontier State in oil production...

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On Alaska's North Slope — where 97% of the state's crude output is located — production has been in a veritable free fall:

alaska oil 5-19

When the Prudhoe Bay oil field peaked in 1979 at 1.5 million barrels/day, it was the beginning of the end.

Last year, the state pumped out an average of 562,000 barrels per day.

In March, more than 575,000 bbls per day flowed out of North Dakota's portion of the Bakken.

Unfortunately for North Dakota's oilmen, next up on the list is Texas.

And don't expect Texas to fall easily — they're one of the few producers left in the country that's also expected to increase production.

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Last year we touched on just a few of the reasons why Texas' oil future was brighter than most.

If you want a good idea of how important these two states are to our domestic supply, keep this in mind: The Bakken, the Eagle Ford in southern Texas, and the Permian Basin in west Texas make up 40% of our onshore production.

Of course, when you toss in the various capacity issues that come as a result of the rapid growth in the Bakken, we're looking at years — decades, even — before North Dakota ascends to the top spot.

But you don't have to pick a "winning" side in this fight...

According to the U.S. Department of Energy, our domestic production is expected to climb as high as 6.7 million barrels per day by 2020 — and stay above 6 million barrels per day through 2035.

In other words, we'll need an extra half million barrels per day over the next eight years.

And it's not hard to guess where we'll find that new supply...

North Dakota alone is projected to top one million barrels per day within the next five years, which would add at least 500,000 bbls/day to the mix. In 2011, Texas increased production by nearly 300,000 bbls per day.

For us, this is just the beginning...

We've narrowed down the field to three specific Bakken drillers showing their true value. Read more about those here.

Enjoy your weekend,

Keith Kohl
Editor, Energy and Capital

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