Another month, another record
By Kate Ruggles
Farmer Staff Writer
At this month’s oil report made by the North Dakota Industrial Commission, the Department of Mineral Resources reported that October’s production numbers brought about another record-breaking total for oil and natural gas production in North Dakota. However, according to Lynn Helms, director of Mineral Resources for the North Dakota Industrial Commission, the new production high does not come with as much enthusiasm as it might have had, had October not been such a poor month for weather in McKenzie County.
“It rained for a period of three or four days straight in McKenzie County in the month of October, and all McKenzie County roads were completely shut down as a result,” states Helms. “McKenzie County accounts for 29 percent of the state’s production totals and a third of all the drilling rigs in the state. Therefore, when an event like that happens, it is very significant.”
Helms states that, in hindsight, the poor weather likely accounts for October’s production numbers being only a 10,000-barrel-per-day increase, rather than much more.
“It would have probably been two or 2½ times that had it not been for the weather event in McKenzie County,” states Helms. “That leads one to speculate about what has happened since then.”
Helms states that November’s weather was great across North Dakota, which he expects will bring about good well production and well count increases.
“December on the other hand has been anything but nice,” states Helms. “The month has brought arctic temperatures, icy roads and snowfall almost every day.”
Helms states that the result of the year-end weather will not be known until February when all the data has been collected and analyzed by the Industrial Commission.
In the month of October, North Dakota produced 941,637 barrels of oil per day and 1,070,270 mcf of natural gas per day. These are new all-time high records, up from 932,962 barrels of oil produced per day and 1,065,736 mcf of natural gas produced per day in September.
McKenzie County led the state in oil and natural gas production for the fifth month in a row having produced 274,280 barrels of oil per day and 416,925 mcf of natural gas per day. This is only a very slight increase over September’s numbers of 268,699 barrels of oil and 406,853 mcf of natural gas produced per day.
Other than the cold temperatures and bad weather that make oil production difficult, December has also seen a tremendous drop in the price of North Dakota Sweet Crude.
“In September, the price of North Dakota Sweet Crude was $93 and in October it dropped to $85,” states Helms. “Today the price of oil is $73 per barrel.”
This drop in the price of oil has caused the Industrial Commission to see a complete shift in the movement of oil from pipeline to rail, the reason being that the pipeline takes North Dakota oil to refineries that are paying less for oil than the refineries that can be reached by rail. The price difference, according to Justin Kringstad, director of the North Dakota Pipeline Authority, is $10 per barrel.
“This change from pipeline back to rail is necessary to maintain the economics of oil production in North Dakota,” states Helms.
“In October and through today, the pricing environment is such that rail will be the most attractive transport method for North Dakota Sweet Crude,” states Kringstad.
Kringstad states that roughly 700,000 barrels of oil per day are being moved out of North Dakota by rail, and that this is the first month the rail numbers have ever been that high.
“If you estimate 100 cars per train and 650 barrels per car, that is over 10 trains leaving the state every day with oil. And roughly that much coming back every day as well,” states Kringstad.
Helms states that North Dakota has the rail capacity to handle moving 90 percent of one million barrels of oil per day, if and when needed.
Helms also states that the state saw a one percent reduction in flaring during the month of October, bringing the total amount of natural gas being flared from 29 percent to 28 percent.
“It is an encouraging number,” states Kringstad. “It means that we are finally starting to get the wells connected to gathering systems at a faster pace than they are being drilled.”
Helms states that the industry’s new Flaring Task Force will present a report on flaring to the North Dakota Industrial Commission in January.