Marathon tests water conservation, downspacing in Bakken

Rachael Seeley,
Editor

BISMARCK, ND-Marathon Oil Corp. is seeking to reduce the environmental impact of operations in the Bakken shale by reducing the amount of water used during hydraulic fracturing and testing wastewater recycling techniques.

Lee Tillman, president and chief executive officer of Marathon, talked about these programs during a presentation to the Williston Basin Petroleum Conference in May.

"In the Bakken, produced water has a high salinity that makes recycling difficult and requires large amounts of fresh water for dilution. However, we're evaluating the use of gels that would allow us to recycle produced water," he said.

The company is also exploring a proprietary water treatment process that yields clean, reusable brine for drilling as well as fresh water for hydraulic fracing. Pilot programs to test both gels and water treatment are planned for 2014.

The water conservation programs build on Marathon's efforts in the Eagle Ford shale. Marathon has reduced by 45% the amount of water used for hydraulic fracturing in the South Texas play by "switching to a polymer gel mix to produce a thicker, more viscous fluid that can also handle more sand," Tillman said.

Marathon Oil Corp. operates six rigs in the Bakken shale and produces roughly 43,000 boe/d. Photo by Marathon Oil Corp.
Marathon Oil Corp. operates six rigs in the Bakken shale and produces roughly 43,000 boe/d. Photo by Marathon Oil Corp.

In addition, more than 50% of the water Marathon uses in the Eagle Ford is considered unsuitable for drinking, agriculture, or livestock. "We're using water that otherwise wouldn't be used anywhere else," Tillman said.

Marathon also participates in FracFocus.org, a hydraulic fracturing chemical disclosure registry. "We think it's important for companies like us to disclose fracturing fluid components, and we have voiced our support for state policies that encourage that," Tillman said.

Development work

Marathon is this year allocating $1 billion of its $5.9 billion capital spending budget to the Bakken shale.

The company holds 370,000 net acres prospective to the play in North Dakota and Eastern Montana. Production increased 16% in the first quarter to average 43,000 boe/d, comprising 90% crude, 4% NGL, and 6% gas.

The company is operating six rigs in the play and plans to drill 45 operated wells this year at a cost of $7.0-7.8 million/well.

During the first quarter, total depth was reached on 16 gross operated wells and the average drilling time was 18 days/well, up from 16 days a year earlier due to severe winter weather in the region.

"Both drilling and completion activities were impacted by extraordinary winter weather in the first quarter of 2014," J.R. Sult, executive vice-president and chief financial officer of Marathon told the UBS Oil & Gas Conference in May.

Marathon's proved and probable reserves in the Bakken have increased 83% since 2011, to 630 million boe at yearend 2013 due, in part, to efforts to test tighter well spacing and tap into the Three Forks formation beneath the Bakken.

Roughly one fourth of Marathon's Bakken production now comes from the first bench of the Three Forks formation, up from 3% in 2011, and the company is participating in three pilot programs with Continental Resources Corp. to test the potential of the Three Fork's deeper benches.

Sult said Marathon is interested in "the opportunity set of the second bench [of the Three Forks], and possibly below, and continuing to improve the completion designs."

Unconventionals Dominate Marathons 2014 budget

The three pilots, operated by Continental, include the Rollefstad density spacing unit in McKenzie County, ND, and the Hartman and Hawkinson density spacing units in Dunn County, ND.

Marathon is also operating four separate pilot programs to test tighter well spacing in its Myrmidon area in southwest Mountrail County, ND, and its Hector area in Dunn County. The programs involve drilling eight wells each on 1,280-acre spacing units. Four wells target the Middle Bakken and four target the first bench of the Three Forks. Wells in each formation are spaced 320 ft apart.

Early testing is yielding encouraging results. The lowest initial production (IP) rate for a well drilled in the four pilot areas is 1,100 boe/d.

The strongest results so far are in the Ostlund spacing unit in southwest Mountrail County, where eight wells came online with IP rates of 1,500-3,500 boe/d.

Additional operated pilots testing 12 wells per 1,280-acre spacing unit are planned before the end of the year.

Evolving portfolio

The Bakken, and other unconventional plays in the US, are playing an increasing role in Marathon's global portfolio. The company underwent a transformation in recent years that began with the spin-off of its refining operations in 2011.

The move made Marathon a pure-play exploration and production company. Since 2011, the company has also raised $6.2 billion, mostly from sales of international offshore assets.

The company last year sold interests in blocks offshore Angola for $2 billion and, until recently, was marketing a package of assets in the UK North Sea. The search for a UK buyer was called off in May after no compelling offers emerged.

In the latest asset sale, signed in May, Det Norske Oljeselskap ASA agreed to purchase the bulk of Marathon's business in the Norwegian North Sea for $2.7 billion.

A portion of the proceeds from the Norway sale will be allocated to the company's three US unconventional resource areas: the Bakken shale, the Eagle Ford shale, and the Oklahoma Woodford shale. Some proceeds will also be used for share repurchases.

This year, more than 60% of Marathon's capital spending budget is dedicated to US unconventional plays. The areas represent a growing share of Marathon's production; Output increased 26% to 154,000 boe/d in the first quarter to account for 33% of Marathon's global production.

This year, the company plans to increase production from its three unconventional US plays by 30%.

"The shale revolution in North America-and in North Dakota in particular-is giving our industry the opportunity to yet again prove ourselves and remind the world of our value and our role on the global energy stage," Tillman said.

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