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James MacPherson, Associated Press Writer, Published April 29 2010

ND study says new oil formation rivals rich Bakken shale formation

BISMARCK (AP) — An oil reservoir in western North Dakota holds nearly as much recoverable crude as the rich Bakken shale formation above it, a new state study shows.

The study released Thursday by North Dakota's Industrial Commission said current technology could lead to the recovery of about 1.9 billion barrels in the Three Forks-Sanish formation.

"This is good news for North Dakota and our country," said Gov. John Hoeven. "This indicates more sustainability in this oil play."

The Three Forks is made up of sand and porous rock directly below North Dakota's portion of the Bakken formation, where oil-producing rock is sandwiched between layers of shale about 2 miles underground.

Ron Ness, president of the North Dakota Petroleum Council, cautioned against overreacting to the state's findings. He said oilmen have known for years the Three Forks holds a vast cache of crude but technology and oil prices haven't made it economical until now.

"Oil just doesn't come when it's in a study," he said. "For the guy out there drilling this helps show investors this thing is for real."

Geologists and oil companies have mixed opinions whether the Three Forks is a separate oil-producing formation or if it acts as a trap, catching oil that leaks from the Bakken shale above. Some have said it could be a combination of both.

The Bakken formation encompasses some 25,000 square miles in North Dakota, Montana, Saskatchewan and Manitoba. About two-thirds of the acreage is in western North Dakota.

Two years ago, the U.S. Geological Survey estimated that up to 4.3 billion barrels of oil could be recovered from the Bakken in North Dakota and Montana, using current technology. The agency called it the largest continuous oil accumulation it has ever assessed. The federal report found up to 2.6 billion barrels of Bakken crude could be recovered in North Dakota, compared with the state's estimate of 2.1 billion barrels.

The USGS said the Three Forks added about 500 million barrels to its Bakken estimate, though it was based on production from traditional vertical wells that were drilled decades ago. The agency has said that it would need at least five years of data from horizontal drilling for a comprehensive study of the Three Forks.

Horizontal drilling in the Three Forks didn't begin until about two years ago.

Lynn Helms, director of the state Department of Mineral Resources, said the state study based its findings on production results from 181 wells in the Three Forks, where some wells are recovering more oil than those in the Bakken.

"It's a remarkable thing," Helms said of North Dakota's oil reserves, which he said have essentially doubled. "It's a real blessing to the residents of North Dakota."

North Dakota produced about 79.7 million barrels of oil in 2009, up from a record 62.8 million barrels the year before. North Dakota surpassed Louisiana last year as the fourth-largest oil-producing U.S. state.

Helms said the Three Forks will add substantially to the amount of proven oil reserves in the U.S.

But Steve Grape, the domestic reserves project manager for the U.S. Department of Energy's information administration, said the state's Three Forks findings would not boost the country's 19 billion barrels of proven oil reserves at present.

He said there is a distinction between proven reserves and oil that can be technically recoverable, the latter he called "pie-in-the-sky estimates."

"Three Forks has a lot of promise," he said. "But it does not add to our proven reserves because it has not been proved yet."

Billionaire oilman Harold Hamm believes the state and federal estimates of recoverable oil in the Bakken and Three Forks are conservative.

"I made a statement two years ago I thought the play (Bakken and Three Forks) has 8 billion barrels of oil," said Hamm, chairman and chief executive officer of Continental Resources Inc., an independent oil and gas company based in Enid, Okla.

Continental was one of the first to tap the Bakken formation in North Dakota's oil patch more than 20 years ago. And Hamm said his company was among the first to aim for the underlying Three Forks.

About half the wells aimed at the Three Forks belong to Continental Resources, Hamm said.

Continental has trademarked the process of drilling multiple wells into the Bakken and Three Forks from one spot, Hamm said.

"We can harvest both from one pad," he said. "It's two for one and it's really nice."

The state study comes before a three-day oil conference that starts on Sunday in Bismarck, where more than 2,000 people have registered, a record.

Copyright 2010 The Associated Press.