October 24, 2012

Bakken is booming

By Kate Ruggles
Farmer Staff Writer

McKenzie County continues to be the hotbed for oil and gas exploration in North Dakota according to information from the North Dakota Department of Mineral Resources (NDDMR).
According to Lynn Helms, director of the NDDMR, the average barrels produced per day in North Dakota in August were 701,000 with an average of 7,701 producing wells.
McKenzie County, for the month of August, saw the number of wells actually in production increase from 1,466 to 1,521 with 1,696 wells capable of producing.
In August, McKenzie County also led the state’s 17 oil-producing counties in both oil and gas production,  having produced an average of 5.2 million barrels of oil per day and almost 7.8 mcf of natural gas liquids. These numbers tower over Williams and Dunn counties and only trail Mountrail by .8 million barrels per day in oil production.
“August weather was great for drilling and hydraulic fracturing resulting in a 3.7 percent oil production increase from July to August,” states Helms.
In fact, western North Dakota has successively set record highs in each month of production in 2012, which is good news for McKenzie County. Because not only has oil been steady, it has been steady amongst a declining rig count and uncertain circumstances.
“The current rig count in North Dakota is low, with 190 in the Bakken and 69 rigs in McKenzie County,” states Alison Ritter, Public Information officer for the NDDMR. “A lot of companies have switched to a more efficient rig, allowing them to keep their drilling at roughly the same level with less rigs. Therefore, we are still continuing to increase our daily oil production output.”
According to Ritter, companies have been facing some uncertain circumstances lately, including rising fracturing costs and the possibility of future federal policies concerning hydraulic fracturing. And both have the potential to impact capital investment decisions.
“The cost of hydraulic fracturing and the hiring of fracturing crews has gone up considerably in the Bakken,” states Ritter. “Which has in turn consumed the capital spending budgets of oil companies faster than they anticipated.”
Companies have tried to deal with the higher costs by reducing their expenses and stretching their remaining capital so it will last through the end of the year. Ritter and the NDDMR expect companies to renew their spending capital for 2013, once some uncertainty settles concerning fracturing.
“The EPA is weighing everything carefully before it makes a decision on hydraulic fracturing guidelines and whether they should be regulated at the national level,” states Ritter.
When it comes to hydraulic fracturing, Ritter stresses that the NDDMR feels those policies should be dictated at the state level due to each state’s differing geology.
“There have been problems with hydraulic fracturing in other states, but their makeup and landscape are different from North Dakota’s,” states Ritter. “Also, in other states the fracturing occurred at a much shallower level, which is not the case in North Dakota.”
Ritter states that North Dakota already has policies in place concerning hydraulic fracturing and that those policies are specific to North Dakota.
“Whatever the federal policy may dictate, we feel that it should be dictated at the state level,” Ritter states.
And, should the federal government disagree, Ritter states that the state of North Dakota will fight to keep those regulations at the state level and has set aside $1 million to do so.
Above all, Ritter and the NDDMR state that oil is an up and down business, but 95 percent of the oil drilling still targets the Bakken and Three Forks formations.
“It is a misconception to think the rig count will never decrease once it increases, and that if it does decrease it means something is going on. Rig counts and production numbers fluctuate, but it doesn’t mean anything,” states Ritter. “The state recognizes how attractive it is to have a productive business climate in North Dakota and it has learned from the lessons of the past. North Dakota continues to be a state that tries to encourage business and promote a healthy business environment.”