Oil drilling in the Bakken and Elm Coulee is a long ways from many Montana cities, but its impact has reverberated statewide, and certainly in Butte at Montana Tech.
While our experience is just one of the ripple effects of the increased Bakken activity, it has proven to be a good one for a growing number of young Montana men and women.
It was about 2002 that Montana Tech began to see a spike in interest in its petroleum engineering program. Drilling activity in the Elm Coulee was a spark for it. In 2002, the department had an enrollment of 130 students. By 2011, Montana Tech had grown to be eighth in size out of 19 U.S. undergraduate petroleum engineering schools. This fall, we're at an all-time high enrollment of 350 students.
That increased awareness of opportunities in the oil and gas industry is something we can attribute to the heightened oil and gas activity, especially in the Bakken and Williston Basin.
Even with the growth Montana Tech has seen, today it still has close to a 100 percent job placement rate for petroleum engineering graduates. We get about 40 companies from the oil and gas industry that come each year to recruit. We hear from them that they see many of our grads as the kind of people who like field operations.
It says something about the young people we are fortunate to attract. They've grown up outdoors. They have a background of doing hard work outside, an appreciation of the land and they are comfortable around machinery. And they know if they do the work, they can find a good job somewhere.
Right now, the average annual starting salary for our graduates is close to $85,000, and most of the larger companies pay cash bonuses of from $10,000 to $25,000 to help students get relocated. That's pretty good for someone in their early 20s and just out of college.
Many jobs are based at national and regional company offices that tend to be in cities like Denver and Houston. So while we may not add a lot of people to the work force here, we have been able to create great opportunities for a lot of young people born and raised here.
The challenge will be to sustain and grow the Montana opportunity. There are three cycles for an oil field: primary, secondary and tertiary. Primary is when the oil flows from natural pressures. We know that even the best fields yield only 20-25 percent of their oil in that cycle.
The secondary is when you inject water to sweep the oil off the rock. That costs more, so the price of oil needs to be high enough for it to be economical. You might get another 25 percent with that effort.
The tertiary cycle is when you inject something else to get the oil flowing: steam or carbon dioxide or a surfactant. The tertiary cycle is very expensive, but I think that is what the future opportunity looks like in Montana. The state has areas not only over towards the Williston Basin but in central and north-central Montana, where there are fields that were depleted in the primary and secondary phases, and there never has been enough economic incentive to do more. The potential is there, though, with today's higher oil prices, for companies to go back and rejuvenate these older fields.
That's where we hope to help. With funding through the Montana Board of Oil and Gas, and support from the major operators, we are engaged in a three-year study over at Elm Coulee to determine that tertiary opportunity. We're looking not just at the engineering but also whether it's economically feasible. If it is, we would expect it to last much longer than the primary cycle.
Ideally, we hope it is a catalyst for another spike in activity – for more jobs, more production, more revenues and taxes for the state of Montana.
Leo A. Heath has almost 40 years of experience in the oil and gas industry. He currently heads the Department of Petroleum Engineering at Montana Tech at the University of Montana in Butte.