By John Kemp
LONDON May 8 North Dakota's leading oilfield
operators hope to squeeze much more oil from its shale
formations by drilling wells closer together - a bold experiment
that could raise ultimate recovery by billions of barrels if it
Oil and gas wells drain hydrocarbons from a fairly large
area, although it is impossible to know the exact extent since
the field cannot be observed directly. This poses a tricky
problem for operators and regulators.
Drill wells too close together and they interfere with one
another, draining oil and gas from the same parts of the
formation and reducing their efficiency. Drill wells too far
apart, and some valuable oil and gas will be left behind in
parts of the formation not near enough to any well bore to be
POOLING AND WELL SPACING
In the early years of the oil industry, landowners and
developers raced to sink as many wells as possible following
each new discovery, aiming to extract as much oil as quickly as
they could before someone else pumped it first.
Under the common law "rule of capture", the person who
brought the oil to the surface owned it, regardless of exactly
which land it came from under.
The result was a chaotic race that resulted in closely
spaced derricks that came to define the early oil industry and
did immense damage to the environment as this photograph
reproduced in the National Geographic shows. ()
Producing oil this way was grossly inefficient. Too many
expensive wells were drilled, each producing little oil and gas.
Overproduction resulted in a swift plunge in field pressure.
Water would encroach on parts of the field, rendering further
production uneconomic and stranding pockets of oil and gas
Beginning with Kansas, New Mexico and Oklahoma, states
started to enact regulations in the 1920s and 1930s to make
production more efficient and conserve valuable resources by
restricting the number of wells that could be drilled in any
given area and requiring mineral owners to work together and
share the proceeds from a common pool or oil field.
To this day, oil and gas regulators in many states are
called conservation commissions or conservation departments (eg
the Oil and Gas Conservation Division of the Kansas Corporation
Commission, and the Wyoming Oil and Gas Conservation
The petroleum industry uses pooling to join together small
tracts or portions of tracts for the purpose of securing
sufficient acreage to comply with spacing regulations.
It uses unitisation, or field-wide agreements, to support
secondary recovery operations such as waterflooding or tertiary
recovery with carbon dioxide injection. ("Compulsory Pooling and
Unitization with an Emphasis on the Statutory and Common Law of
the Eastern United States" 2007)
With the exception of Texas, all oil and gas-producing
states now have provisions for compulsory pooling and
unitisation and also enforce spacing and drilling regulations
that limit the number and distribution of wells that can be
In Texas, a bill to require unitisation in certain
circumstances for oil, gas and carbon dioxide storage operations
is pending before the state House of Representatives (HB 100)
but stands little chance of becoming law before the end of the
Compulsory unitisation has sparked a fierce debate between
opponents (angry about the infringement of private property
rights) and proponents (who argue unitisation would enable the
state to match the much higher recovery rates achieved in other
states with compulsory unitisation such as Louisiana).
In the rest of the country, unitisation, pooling either
voluntarily or if necessary by compulsion, and well-spacing
orders have long been accepted as normal.
NORTH DAKOTA CENTURY CODE
North Dakota enforces fairly typical rules on well-spacing
Chapter 38 of the state's Century Code gives the North
Dakota Industrial Commission powers to "(promote) greater
ultimate recovery ... and to encourage and authorise cycling,
recycling, pressure maintenance and secondary recovery
operations in order that the greatest possible economic recovery
of oil and gas be obtained".
Before drilling any oil or gas well, a permit must be
obtained (Century Code 38-08-05). The Commission "shall set
spacing units" according to the code "when necessary to prevent
waste (and) to avoid drilling of unnecessary wells". (CC
Voluntary unitisation agreements are authorised and exempt
from antitrust rules provided they are approved by the
commission (CC 38-08-09).
When two or more separate mineral owners share rights within
a single spacing unit, they may agree a voluntary pooling
arrangement. "In the absence of voluntary pooling, the
commission upon the application of any interested person shall
enter an order pooling all interests in the spacing unit for the
development and operations thereof." (CC 38-08-08)
TIGHTER SPACING, HIGHER RECOVERY?
North Dakota's Administrative Code contains standard spacing
regulations (AC 43-02-03-18). But most operators planning to
drill and frack a horizontal well in the Bakken and Three Forks
formations have applied for a customised spacing order for their
As in other states, spacing units are meant to reflect the
distinct geology of the formation and the area each well is
likely to drain without interfering with other wells.
But now operators are pressing the Commission to approve
more, smaller spacing units and permit them to sink many more
wells into each one, targeting different formations (Bakken,
Three Forks) and different layers within each formation.
NDIC has generally approved one well per 1,280-acre spacing
unit (one square mile) for each formation or two adjacent
640-acre sections. But some companies have been allowed to drill
one well per 640-acre section. Some have even "downspaced" to
two wells per 640-acre section (320-acre spacing). Now some are
experimenting with 160-acre spacing patterns, according to
consultants at Ryder Scott.
The environmental impact is minimised by drilling all the
wells from a single location.
Continental Resources, one of the pioneers of Bakken
drilling, is currently testing a programme that would sink 14
wells into every 1,280-acre spacing unit - four into the middle
Bakken layer (320 acre spacing), three into the top layer of the
Three Forks, four into the next layer down, and three into the
The honeycomb spacing pattern is explained on slides 69 and
71 of its September 2012 presentation to investors. ()
Drilling results support 320-acre spacing, according to
Continental, and engineering simulations show that even 160-acre
spacing might be profitable.
Well-spacing might seem esoteric. But the basic idea is that
fracked horizontal wells are draining smaller areas than once
thought and can be put closer to one another without
interference. If true, drilling costs could fall dramatically
(closer spacing is cheaper and more efficient) and far more oil
could ultimately be recovered.