The successful development of the Bakken over the last few years has led some pundits to compare the resources here favorably with the Ghawar field in Saudi Arabia, considered the mother of all oil fields and one of the world's supergiant fields.
Discount Brokers Comparison: Your one-stop shop for finding the perfect broker for your investments.
Saudi Oil History
In 1933, Chevron (NYSE:CVX), then known as the Standard Oil Company of California, was given a concession by Saudi Arabia to explore for oil. Chevron set up the California Arabian Standard Oil Company (CASOC) to handle these operations. Three years later, Chevron sold a 50% interest in this subsidiary to the Texas Company, which later changed its name to Texaco. Texaco was later purchased by Chevron in 2000.
The two operators explored for oil in Saudi Arabia for several years and first began production in 1938 at a field in Eastern Saudi Arabia. CASOC changed its name to the Arabian American Oil Company in 1944 and later sold shares to the Standard Oil Company of New Jersey and Socony-Vacuum Oil Company.
Standard Oil Company of New Jersey is now known as Exxon Mobil (NYSE:XOM), while the Socony-Vacuum Oil Company changed its name to Mobil Oil and was eventually purchased by Exxon Mobil in the late 1990s.
Saudi Arabia established an ownership stake in the Arabian American Oil Company in 1973, and had 100% ownership of this company by 1980, with the original participants acting as operators. The name was changed in 1988 to the Saudi Arabian Oil Company or Saudi Aramco.
SEE: A Guide To Investing In Oil Markets
CASOC had its first success in Saudi Arabia with the Dammam No. 7 well in March 1938, reporting production of 1,585 barrels of oil per day. Oil production moved higher over the next few days and the Dammam No. 7 well produced 100,000 barrels of oil in the first three weeks of production.
The Ghawar field is approximately 2,050 square miles, or 1.3 million acres in size and produces from six general areas. Oil was first discovered at the Ghawar field in 1948, with production starting up in 1951. The main oil-producing reservoir at the Ghawar field is the Upper Jurassic Arab-D limestone, which is presently at depths ranging from 6,000 to 7,000 feet and is approximately 280 feet thick. The field also produces natural gas from various Paleozoic reservoirs.
Oil production from the Ghawar field peaked in 1981 at 5.7 million barrels per day and the International Energy Agency estimates that the field had 140 billion barrels of oil reserves, with approximately 47% of this oil already produced.
SEE: Oil And Gas Industry Primer
The North Dakota Industrial Commission reported that oil production from the Bakken reached 662,000 barrels per day in September 2012. There is also development of the Bakken in Montana and parts of Canada so the formation's total production is higher than this.
One method of gauging the potential productive capacity of the Bakken is to examine the planned takeaway capacity being built to transport Bakken oil to various markets. The industry estimates that the Williston Basin will have just over 3 million barrels per day of transport capacity by the end of 2017, consisting of pipelines and railway infrastructure.
Plains All American Pipeline, L.P. (NYSE:PAA) is building the Bakken North Pipeline which will run 80 miles and connect with the Wascana Pipeline System. The project will cost an estimated $55 million and be operational in early 2013.
ONEOK Partners (NYSE:OKS) is building a natural gas liquids (NGL) pipeline to serve the development of the Bakken. The pipeline will cost from $430 million to $500 million and run approximately 500 miles, bringing NGLs from processing plants in the Bakken down to an existing pipeline in Colorado.
The Bottom Line
While some pundits have compared the Bakken play to the Ghawar oil field in Saudi Arabia, this hyper-growth play in the onshore United States has much ground to travel before matching the scope and ouput from the prolific Saudi field.
At the time of writing, Eric Fox did not own any shares in any company mentioned in this article.
Stock AnalysisStuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
EconomicsEmerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
Stock AnalysisPepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
InvestingHow do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
InvestingMany global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
Stock AnalysisThese three stocks are resilient, fundamentally sound and also pay generous dividends.
Investing NewsAre stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
Investing NewsHere are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
Investing NewsHere are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
Stock AnalysisIf you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>