September 22, 2015

Oil, gas production holds steady

By Kate Ruggles
Farmer Staff Writer

In spite of little to no shift in North Dakota’s oil and natural gas production numbers during the month of July, the North Dakota Industrial Commission continues to encourage everyone to “Hang in there.”
“Oil production is essentially unchanged,” reports Lynn Helms, director of Mineral Resources for the North Dakota Industrial Commission. “July production is down one percent from June to July, and gas production is up 0.5 percent from June to July. Well numbers are also up, but not dramatically, just a small increase.”
In addition, the July report comes in the face of declined oil prices, permitting and rig counts.
“Currently, the state is down six rigs from August, bringing today’s count to 69 rigs operating in the state,” states Helms.
Yet despite the barrage of negative factors, the state continues to maintain production. In July, North Dakota produced 1,201,920 barrels of oil per day and 1,657,392 MCF of natural gas per day.
And of those totals, McKenzie County is still the most productive oil and gas producing county in the state having produced 13,445,641 barrels of oil and 23,022,999 MCF of natural gas. During July, McKenzie County produced 36 percent of the state’s oil production and 44 percent of its natural gas production.
Helms states that there was a lot of regulatory pressure to complete a large amount of unfracked wells in June. But that pressure was non-existent in July, and yet there was only a one percent decline in the state’s oil and natural gas production.
There will not be another regulatory well-completion push until December 2015 and January 2016.
Currently, there are 900 wells waiting on completion and Helms feels that, “companies will continue to bank those unfracked wells as a way to maintain cash flow at a much lower cost, and to have those wells available as necessary, to satisfy stockholders or investors.”
One interesting production shift took place on the Ft. Berthold Indian Reservation, which showed an increase in oil production of 11,000 barrels per day while the state’s oil production was down 10,000 barrels per day in the month of July. Drilling permits on all lands on Ft. Berthold also went up over the previous month, according to Helms.
“We are thinking that the Tribal Council’s action to suspend a lot of the West Segment rule-making authority has encouraged the industry and resulted in them to move back in,” states Helms. “Ft. Berthold also happens to be the best geology in North Dakota with wells that are three times as good as other wells, which encourages the industry too.”
On a more negative side, Helms stated that some ground was lost in the area of gas capture. Not only has the state lost an entire construction season due to right-of-way issues, but the state is seeing a slight increase in flared volumes.
“Even though we have seen pretty good results on the percentage of gas capture, every month we have seen a little bit of an increase in flared volumes, which is really counter to the Industrial Commission’s goals,” states Helms. “The percentage is a way to monitor gas capture, but less gas flared is the real goal.”
Helms believes the reason for the increase in flared volumes has to do with the migration of drilling and completion activity into the high gas/oil ration areas of northeastern McKenzie County, southeastern Williams County and northwestern Dunn County.
“These are the best areas for producing oil, but they also have a lot more gas associated with the oil produced,” states Helms. “As rigs and completions have migrated into these areas, there has been a lot of upward pressure on gas volumes, which means that there is a lot more gas coming into the system than anticipated 1½ years ago.”
Helms states that there are three key infrastructure pieces that need to come into place to help the current flaring situation - the Lonesome Creek Plant coming online during the first quarter of 2016, the Bear Creek Plant coming online in the third quarter of 2016 and a river crossing at Charlson being built to carry gas from Hawkeye and Antelope to the  Tioga gas plant.
The slowdown on these plants could be aided by a warm winter, but according to Helms, if the state sees a typical North Dakota winter this year, things will likely get worse.
Helms also states that today’s lower natural gas liquids prices will make some of that key infrastructure construction economically not feasible.
“Two years ago, propane was over $5 per gallon, but today you can haul it away from a gas plant for a nickel,” states Helms. “If low prices continue, it will not be economical to build those two plants, which must be built for the state to achieve its gas capture goals.”
The final hindrance to the state’s oil and natural gas production continues to come in the form of federal regulation.
“We have known for six years that the Obama Administration was busy writing oil and gas rules. And now, they are rolling them out,” states Helms.
According to Helms, rules are being made regarding the Waters of the U.S. Act, the Environmental Protection Agency, Methane Emissions, and the Endangered Species Act.
Helms states that the state has set aside the funds and has staff dedicated to working on these rule makings - reading through the 1,000 pages of the rules, to understand and make comments within the allotted time frame, as well as take legal action if necessary.
“It is just kind of coming from all directions,” states Helms. “But we are still amazingly maintaining production.”