http://www.epmag.com/2011/May/item83115.php

“North Dakota gets it. The State understands what shale oil can do not only for the State of North Dakota, but also for the nation as a whole," said keynote speaker Greg Hill, Hess Corp.'s executive vice president and president of worldwide exploration and production, at the Developing Unconventional Oil (DUO) Conference presented by Hart Energy.

The Spring 2011 DUO Conference, running May 23 through 25 at the convention center in Denver Colorado, is one of several leading industry confabs presented by Hart Energy where literally thousands of operators, investors and exhibitors from around the world gather.

The Denver show put the spotlight on Hill as he delivered the opening keynote address followed by dozens of other executive-level presenters who shared cutting edge experience amassed in the oily shales of the Bakken, Eagle Ford, Niobrara, and beyond.

The U.S. has tripled its production of shale oil from 2008, an increase flowing primarily from North Dakota’s Bakken wells.

Before Hill took to the podium, Hart Energy’s Oil and Gas Investor Editor-in-Chief Leslie Haines introduced Hill, saying, "U.S. oil production is on the rise. This is an incredible turnabout of events for our country, a very important event for our economy and for our energy security.”

Haines said, “There are all kinds of wonderful projections that oil production from the Bakken alone could be as much as 600,000 barrels per day (b/d), in just a few years.”

North Dakota's oil output continues to climb rapidly. Already up to 405,000 b/d, operators across this prolific trend are closing in on a 450,000 b/d production level.

“When you add the Montana side, it reaches maybe 1,000,000 b/d which is really unprecedented in our country’s history,” Haines said, adding that “We are delighted today to open with a company that has led the way.”

Hess Corp. opened the Williston Basin in the 1950s, and it is continuing that tradition with an aggressive Bakken program. The company holds some 500,000 net acres in the Bakken play, and prides itself on a lean manufacturing approach and an advantaged infrastructure position.

Hess Corp. entered the Bakken with a big acquisition, although it has been a major presence in North Dakota for more than 50 years. Hess is running an 18-rig program, primarily with single laterals. The push is on to get Hess' new acreage held by production (HBP). The 2011 target is 40,000 b/d from the Bakken play.

“I am continually amazed at the ingenuity and resilience of our industry,” Hill began his address, noting that “Necessity is always the mother of invention….Unconventional oil will absolutely be a necessity for the world.”

“Unconventionals will be one of the most preferred resources because of their relatively low supply costs, their relatively easy accessibility, and finally, their short time to market.

"Conventional supply will be displaced by unconventional supply because of the advantages offered. Our belief is that by 2015, unconventional oil will be about 40% of the U.S. onshore liquids production,” Hill said.

To realize these opportunities, Hill revealed that one of Hess’ corporate strategies is to build the company’s global position in unconventional resources.

With capabilities learned in the Bakken, the company seeks to leverage those into other regions and ultimately build a global portfolio of unconventional resources.

From the slides and comments Hill presented, it became apparent that Hess’ worldwide upstream efforts are well on the way along that path under Hill’s leadership.

Before taking his current position at Hess Corp. in January 2009, Hill served Royal Dutch Shell as executive vice president, Asia Pacific exploration and production, and formerly had responsibilities for onshore production in parts of the United States and offshore production in Europe.

That global experience is being put to use in an upstream portfolio that includes numerous offshore and conventional projects, as well as a growing position in unconventional shale regions around the world.

Hill’s presentation detailed the company’s unconventional portfolio which includes not only the Bakken and the Eagle Ford, but also in emerging or potential unconventional basins in France (the Paris Basin), numerous emerging trends in China, and even a majority stake in Australia’s Beetaloo Basin operated as a venture with Denver-based Falcon Oil and Gas Ltd.

“Of course,” Hill said, “the U.S. is the most mature of the plays.”

Hill’s keynote address noted that “lean manufacturing” was one of the key capabilities that is being developed in the Bakken play to the benefit of the company’s operations there and unconventional operations elsewhere.

The easiest way to visualize the lean manufacturing approach is via a good example--pad drilling,” Hill told attendees at a breakout question and answer session after the presentation.

“Simultaneously, we are producing, drilling, and completing all on one pad,” a method which allows the company to “drop out a whole lot of waste and inefficiency…,” Hill said.

“Lean manufacturing is the body of knowledge that was pioneered by the automotive industry. It really just looks at how things flow inside your company and how your processes flow. The challenge of lean manufacturing is to continue to try to eliminate that waste,” Hill continued.

“We started with lean manufacturing in the Bakken program two years ago. We are seeing productivity gains of 25% to 30% pretty much on everything we apply it to.

“For example, Spud-to-Well-on-Production time, we have been able to cut that cycle time by 25% by applying lean manufacturing techniques. There is just a lot of motion and transportation and waste and things not being ready on time.

“So if you analyze that in detail, you will be able to make a significant impact on cost structure and productivity. Not easy to do and it’s something that you have to learn to do.”

Contact the author, Greg Haas, at ghaas@hartenergy.com.