North America Risk and reward from t
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RECENT satellite image of the United States at night reveals a striking patchwork of lights
from the country’s towns and cities. These appear in stark contrast with the darkness of the Great Lakes, the surrounding oceans and much of the Great Western Plains. Yet where sparsely populated areas of
North Dakota should be dark, here there is a mysterious concentration of lights and activity comparable with any of the country’s larger metropolises. This isn’t a new city, but the light
from vast shale oil and gas fields and their neighbouring settlements that have emerged in just the past few years, reflecting a new phenomenon in domestic American energy production. The Bakken region, which covers
518,000km across far eastern Montana, most of North Dakota and the southern tip of Saskatchewan, Canada, and the largely unexplored Three Forks region, which stretches into South Dakota, are estimated to have combined reserves of
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over 7.4 billion barrels of shale oil according to the US Geological Survey (USGS). The region sits within the resource-
rich Williston Basin, and since drilling started in 2008, North Dakota has become the second largest oil producing state in the United States; it surpassed Alaska last year and now sits behind only Texas which is going through its own shale oil boom. The North Dakota Department of Mineral Resources says that extraction has more than doubled since 2011 in the Bakken region to around 750,000 barrels of oil per day (bopd) through the use of hydraulic fracturing, or “fracking.” This involves injecting water, sand
and chemicals into bedrock formation deep below the ground to increase or create rock fractures, which on petroleum-bearing rock formations will release oil and/or gas to the surface well. Recent technological advances have improved the economics of this process prompting the rush to extract
the Bakken’s wealth. However, moving the oil to market is
difficult. Pipelines, the traditional method of transporting oil long distances to refineries, are not currently up to the capacity required. They are also expensive and problematic to build. For example, the $US 5.3bn,
830,000bopd Keystone XL project, which proposes transporting 100,000bopd of Bakken crude along with Canadian tar sands oil from Montana through South Dakota and Nebraska to join the existing 3462km Keystone Pipeline, which runs from Canada to the Gulf, at Steele City, Nebraska, is facing fierce opposition from environmentalists. This has led politicians to debate the merits of the project and the US State Department to delay approving it. Other projects, such as the $US 2.5bn Sandpiper pipeline, which will have capacity for 225,000-375,000bopd when it opens in 2015, have not faced this environmental scrutiny, and are moving
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