Did you know that oil and natural gas is the fastest-growing manufacturing industry in the U.S.? It's amazing to imagine that a country whose oil and natural gas output was sliding for four decades is now the third biggest global producer. It all started with the discovery of huge reserves in the U.S. shale fields.

U.S. oil output: The fall and rise
Ever since reaching peak production in 1970, there has been a steady decline in the U.S. oil and natural gas output. In the 1990s, the U.S. imported about two-third of the total oil consumed. Production declined to such an extent that total production in 2006 was almost equal to the production volume of 1947. The depleting reserves were spelling doom for the industry.

Then dawned a new era characterized by new and advanced technologies of exploration and extraction. Hydraulic fracturing and horizontal drilling were discovered, which made extraction from below the hard rocks of the U.S. shale fields a reality and at affordable costs, too. Shale fields like Bakken, Barnett, Eagle Ford, Woodford, and Marcellus gained significance. These shale fields boast huge quantities of reserves, with Bakken being the biggest.

Exploring Bakken
The Bakken shale lies in the Williston Basin and is spread across two states -- North Dakota and Montana -- and two Canadian provinces, Manitoba and Saskatchewan. A survey by the U.S. Geological Survey in 2008 estimates that there are 3.65 billion barrels of recoverable crude oil present in the Bakken, the largest in the U.S. other than Alaska. 

The USGS also estimates about 2 trillion cubic feet of gas and 150 million more barrels of natural gas liquids to be present in the Bakken shale, although many analysts expect the total reserve available to be much higher. According to CEO Harold Hamm of Continental (NYSE: CLR), which is one of the pioneer drillers in Bakken, the total available reserve could well be around 24 billion barrels -- the highest in any U.S. field. The U.S. government has confirmed that it will reassess the amount of oil and natural gas present in Bakken shale.

Bakken has proven to be one of a kind. The total liquids production in Bakken has increased from about 1 million barrels in 2005 to nearly 50 million barrels in 2009. That's a mind-blowing increase. North Dakota, which is currently the fourth largest producer of oil in the United States, could by 2015, become the second largest oil producer, beating Alaska and California. Production from Bakken may even surpass Ecuador, an OPEC member.

With such bounties on offer, global oil majors have flocked to the place.

Companies betting high
Hess (NYSE: HES) CEO John Hess expects oil production from its North Dakota's productive Bakken Shale unit to triple by 2015 with increased drilling. Another Bakken shale player, Whiting Petroleum (NYSE: WLL), also reported a high rate of production from a well drilled there. Sensing the golden opportunity, operators are entering Bakken big-time, and the ones already present are increasing their acreage position. Statoil (NYSE: STO) entered Bakken with a $4.4 billion acquisition of Brigham (Nasdaq: BEXP), while Kodiak (NYSE: KOG) increased its Bakken acreage by acquiring Williston Basin oil and gas producing properties and undeveloped leasehold.

With increased production comes the burden of transport. Crude oil needs to be transported to refineries via a good infrastructure of pipelines. Enbridge Energy Partners (NYSE: EEP) operates in the Bakken play to transport oil, but the increased supply is creating a glut. Looking at the demand prospect, Enbridge Energy Partners will invest around $90 million in increasing its pipeline capacity in North Dakota by 100,000 barrels per day. Even then, the hiked capacity won't be sufficient. Existing players are already trying out road and rail transport.

Goodies for all
Using road and rail have boosted the consumption of diesel. In North Dakota, it went up by a whopping 29.3% in September compared with the same period last year. To cater to increased diesel demand, a new refinery is being set up in North Dakota. We can see how the Bakken play, apart from uplifting the energy sector, is creating a lot of jobs in the state and thereby improving economic health. Halliburton (NYSE: HAL) recently announced that it will hire 11,000 employees, mostly for Bakken. All these developments have made North Dakota the fastest growing state economy in the U.S.

Foolish takeaway
Bakken play reserve estimates have been going up by leaps and bounds -- from a trifle 151 million barrels in 1995 to 4.3 billion barrels in 2008, and now it is expected to hold almost 24 billion barrels of recoverable oil reserves. With another government survey coming up, everyone is waiting anxiously to see whether Bakken will become the biggest acreage of recoverable oil and natural gas in the U.S., beating Alaska. Production in the area has also risen by a significant amount, from 1 million barrels in 2005 to nearly 50 million barrels in 2009. With improvement in drilling and exploration technologies, the numbers are only expected to move in one direction -- up. Having said that, I must add that Bakken promises much more to the U.S. than just the amount of reserves it holds.

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