ALL of my oil contacts and BNSF people say they are planning for 75+ years.
Well, that's just plain foolish. Oil's going to be completely economically non-viable from the demand side well before that. The long term, I know about. There's multiple phenomena happening at once, and I could go through it in excruciating detail, but the effect for oil is that its role as a fuel is disappearing. The production price can't fall fast enough to counteract that. But that's a 30-years-from-now phenomenon. Still, it means that planning for 75 years of drilling is unsound; 40 years from now, nobody is going to be drilling and fracking new wells, because nobody will want the oil.
I just love how the pundits wrote off US oil production back in the 1970's saying we would run out of oil within 30 years-oops.
We peaked right then. Lower-48 production's been down since then. They opened up the Alaska fields, but the predictions were correct. Later, vastly elevated prices allowed expensive stripper production, fracking, etc., but they're only viable at elevated prices compared to ultra-cheap "conventional" oil.
Technology is making the Bakken happen now and NO one can predict when these fields will lose their economic viability now.
It's not so hard to predict over the long term (30 years plus), because their economic viability will be limited demand-side as oil becomes obsolete (which is already happening, slowly). There's complicated fluctuations in the shorter (5-10 year) term.
My money is on the longer term, for a variety of reasons,
It's up to you, but if I were you, I'd get your money out before you lose your shirt on it. It's one thing to idly speculate, it's another to waste your money on bad investments.
not the least of which is the fact that my neighbor, who is very much involved in this play, says less than 11% of all planned wells have been drilled in ND and even fewer numbers in MT. At break even numbers in the low $30's/bbl there is still a huge amount of oil (and also natural gas) to be extracted from this area. BTW-just 10 years ago the break even number was around $50/bbl, so the cost curve is going down.
None of the reputable estimates -- not counting the overly optimistic internal estimates, which is apparently what you've been listening to -- say that it was at $50/bbl 10 years ago. NONE of them.
The basin average estimate breakeven is still running in the $55-$65 range NOW, and yes, it has declined over time. I'm sure it's lower in the sweet spots, but they're small. The Utica and Marcellus sweet spots are at $25 - $30, *but they're small*, and the sweet spots in the Bakken have the same problem: they're small. The companies which managed to cherry-pick them will do all right, but that's not going to keep volume up.
Or maybe you're looking at pre-transport prices? Maybe that's it. The *wellhead* price is $12-$15 less than the *refinery* price which is much closer to that quoted on the international markets. At current *wellhead* prices, $30/bbl breakeven is dangerously close to unprofitable.
Or maybe you're looking at the pre-financing breakeven number? This is a huge deal, since there are a number of plays which are profitable if invested with cash, but have poor returns and can't cover their debt or give a decent return to stockholders.
Don't get me started on the financial engineering the fracking companies have done, which I've dug through in great detail. Suffice it to say that many of them have been selling their wells by inflating estimates of future production: drill-and-flip. In addition, many have been financing with heavy debt. In investment terms, this is fishy as hell.
Drilling is up a bit in 2015, but over the Bakken industry as a whole, profits aren't. Instead, debt is. This is a bad sign. Companies are deliberately doing unprofitable drilling in hopes that prices will go up later, or perhaps to keep the rig companies from shutting down. Some of the companies are making profitable decisions (last analysis I read said that EOG was doing well and Whiting was doing OK).. but a lot of them are not.
The fundamental problem with fracking is the "drilling treadmill". With decline curves of upwards of 30%-40% in the first year, you don't have very many years from each well. Improved technology has actually made the decline curves *worse* by frontloading even more of the extraction. There's been a run of scams based on advertising these wells as if they had better decline curves.
Given this treadmill, a fracker basically has to recover their entire drilling cost for a well, *and* make your profit for stockholders or bondholders, in the first few years. Doing this honestly depends on a very high oil price. (Doing this dishonestly is done by selling the well to a sucker at an inflated price after the first year.)
And the most fundamental thing about the treadmill is that the economics *are not like the economics of old oil wells*. Keeping an old "conventional" oil well running, after it's been drilled, costs *next to nothing*. It gushes profits for decades on end. Not so with fracking; the first few years production have to cover the entire cost. Sure, you can drill more, but this sets a minimum price which is *way* higher than with conventional oil.
Which means that if demand for oil drops (which it will) it gets easier and easier for the Saudis to undercut the fracking price. Which they have an explicit stated intention of doing.
You miss the point entirely about why a refinery is not economically viable on the Hi-Line. Any energy person will tell you that you try to place refineries close to major economic and transportation hubs that possess a critical mass of a number of factors. The Bakken area does not generally fit the bill. I look at our situation in MT. We have several refineries, clustered in the Billings area, which just happens to be the main population, economic and transportation hub of our state.
Well, OK, so that's a possible argument for not locating refineries there, if they think that the Bakken area will continue to be an unpopulated empty wasteland. It's the same argument for not putting refineries in most of Texas outside the coastline, though, and they did put refineries in there, because they figured that people would follow the really-long-term oil production.
I guess MDU, who are actually building a refinery, seriously believes in the field, though it's a pretty small refinery. Most of the drillers do not believe in the field's long-term viability, and their behavior makes it clear.
