Canary in the Fracking Play?

A couple Fridays ago, the July production data for the Bakken field in North Dakota were released:

June Oil 32,775,559 barrels = 1,092,519 barrels/day
July Oil 34,429,910 barrels = 1,110,642 barrels/day (preliminary)(NEW all-time high)
1,047,034 barrels per day or 94% from Bakken and Three Forks
63,608 barrels per day or 6% from legacy conventional pools

June Gas 37,588,622 MCF = 1,252,954 MCF/day
July Gas 40,035,470 MCF = 1,291,467 MCF/day (preliminary)(NEW all-time high)

June Producing Wells = 11,090
July Producing Wells = 11,287 (preliminary)(NEW all-time high)
7,862 Wells or 70% are now unconventional Bakken –Three forks wells
3,425 wells or 30% produce from legacy conventional pools

Hey, a new record high.  That's good news.  But compare it to the June data:

May Oil 32,254,545 barrels = 1,040,469 barrels/day

June Oil 32,778,524 barrels = 1,092,617 barrels/day (preliminary)(NEW all-time high)

1,048,462 barrels per day or 96% from Bakken and Three Forks

44,155 barrels per day or 4% from legacy conventional pools

May Gas 36,978,663 MCF = 1,192,860 MCF/day

June Gas 37,594,631 MCF = 1,253,154 MCF/day (preliminary)(NEW all-time high)

May Producing Wells = 10,902

June Producing Wells = 11,079 (preliminary)(NEW all-time high)

7,704 Wells or 70% are now unconventional Bakken –Three forks wells

3,375 wells or 30% produce from legacy conventional pools

So, 158 new wells came on-line, but overall production from the Bakken-Three Forks wells actually decreased by over 1,400 barrels a day.  There are a lot of potential explanations for the decrease, including bad weather, inaccurate data (they are preliminary numbers), onetime factors or other background that I can't think of.  Also, this is just one month of data. 

However, there are also a few potential factors which lend credence to doubts of more optimistic views of the "shale oil revolution."  We are getting 3 years on from when well startups really took off in the Bakken play, so those wells are probably reaching the end of their significant production lives.  July, 2011 saw 198 new wells come online, and total production increased from 384,809 barrels a day to 423,550 barrels a day.  That was a 38,741 barrel per day, or 10 percent increase.  Going forward, it may take almost 150 wells per month just to replace the decline in production from 3 years worth of existing wells.  That will make the monthly increases in production harder to come by.  Likewise, you are more likely to see more dry holes and more low-production wells as we move away from the sweet spots in the field. 

Next month's data release may show July to be a one-off decrease in production, but the warning is still there.  Several folks are predicting a peak in production within 2 or 3 years in the Bakken.  The Eagle Ford and the Permian basins will see peaks eventually, too.  So it is very likely that soaring oil prices and supply issues will be seen in our intermediate future.  That will strain what is already a shitty economic expansion and put a greater strain on already suffering middle-class households.  That will be bad.