North Dakota's Bakken is one of the most phenomenal shale oil growth stories. Thanks to a potent combination of horizontal drilling and hydraulic fracturing, production from the vast shale formation recently surpassed 1 million barrels per day, up from less than 200,000 barrels per day in 2007.

But some commentators suggest that this rapid production growth can't go on for much longer, citing sharp decline rates for Bakken wells. Could this mean that Bakken production is rapidly approaching a peak?

The debate over decline rates

According to Continental Resources (NYSE:CLR) President Rick Bott, the answer is a resounding no. At the IHS CERAWeek conference in Houston earlier this year, Bott made a forceful argument that the Bakken still has several decades of life left and that production from the play is nowhere near its peak.

His views are in sharp contrast to those of shale skeptics who argue that Bakken production is quickly nearing a peak because shale wells feature much steeper decline rates in their first few producing years than conventional wells. After the initial decline, output falls off to very low levels, they argue.

Their point is a valid one. According to the EIA, production from Bakken legacy wells is declining at a rate of about 72,000 barrels per day. Meanwhile, production from new wells is running at about 92,000 barrels per day, which means that net production is growing by only about 20,000 barrels per day.

But Bott fired back against the skeptics, saying that their overarching emphasis on decline rates is misguided. Though he admits that shale wells do have higher initial decline rates than conventional wells, he says that they still produce at high post-decline levels for long periods of time. Shale production "has a really long tail," he argued. "It's that tail you're counting on."

Growing resource potential

Another reason Bakken production might not peak for a while is that technological advancements continue to boost the total quantity of ultimately recoverable oil and gas in the formation. Last year, the U.S. Geological Survey nearly doubled its estimates of the Bakken's resource potential from 3.6 billion barrels of ultimately recoverable oil to at least 7 billion barrels of oil because of the inclusion of the Three Forks formation -- a deeper, separate formation that lies directly below the Bakken and extends further out into parts of Montana and South Dakota.

Basically, as drilling techniques have improved, they've made it economically feasible to tap the Three Forks. Not surprisingly, many Bakken producers have seen strong growth in their reserves. Continental Resources, for instance, reported a 38% year-over-year jump in proven reserves to 1.08 billion barrels of oil equivalent, or boe, at year-end 2013, thanks largely to extensions and discoveries in the Bakken and Three Forks.

Similarly, Kodiak Oil & Gas (NYSE: KOG), an oil and gas junior with assets located primarily in the Bakken, reported a 77% year-over-year increase in proved reserves to approximately 167.3 million boe as of year-end 2013. Meanwhile, ConocoPhillips (NYSE:COP), which has significant operations in the Bakken, added 470 million boe of reserves from its operations in the Lower 48 last year, with a large portion of those reserve additions coming from the Bakken.

Additional improvements in drilling technology could further boost the Bakken's recoverable resource potential. With current technology, only about 3.5% of the formation's total reserves are recoverable. But advancements in technology and other efficiency improvements could allow producers to recover as much as 12%-16% of the oil in place in the Bakken 10 years from now, according to Pete Stark, senior director and advisor for upstream research at IHS.

The bottom line

Technological progress has been a true game changer for shale formations like the Bakken, allowing operators to open up entirely new plays like the Three Forks. While high legacy decline rates in the Bakken are indeed a major cause for concern, technological advancements that result in improved recovery rates and greater well productivity could stem the impact.

However, absent major improvements in technology, net production growth could continue to slow if legacy declines become bigger. This would suggest that Bakken production could reach a peak much sooner than most experts believe, perhaps as early as before the end of this decade. Investors should keep this risk in mind when investing in Bakken producers, and shale producers in general.