April 15, 2014

State close to one million barrel mark

By Kate Ruggles
Farmer Staff Writer

The theme of this month’s Director’s Cut report from Director of Mineral Resources Lynn Helms is, “Wait for it.” The theme refers not only to February’s oil and natural gas production numbers and the state’s slow recovery from its big drop in production in December of 2013, but also the long and continual stride toward producing one million barrels of oil per day.
“There are very few provinces or states that are in the club of producing more than one million barrels of oil per day,” states Helms. “It is a very exclusive club and very exciting to be on the cusp of it.”
Together, the U.S. portion of the Williston Basin, which resides in portions of North Dakota, South Dakota and Montana, as well as extends into Canada, produces in excess of one million barrels of oil per day. So the thought that the North Dakota portion of the basin could be near entering that level of production has the North Dakota Industrial Commission looking forward in anticipation.
As for February’s production numbers, Helms reports that periods of -20 degree weather in combination with high winds and roughly 18 total days of temperatures that were five degrees below the February norm, put a hamper on production.
“And February is normally a cold month to start with,” states Helms.
The state produced 951,340 barrels of oil per day and 1,063,756 MCF of natural gas per day in February. And McKenzie County topped the state’s production charts again having produced a total of 8,143,125 barrels of oil and 12,352,825 MCF of natural gas in February.
“People are finding that there is part of the Bakken and Three Forks play that has the best rate of return of any of the other Shale basins in terms of oil and natural gas production,” states Helms. “It is that area we always talk about that is in a rectangle from Watford City to Ray, over to Stanley and down to Killdeer. Within that area is very high initial production (I.P.) rates and high rates of return.”
According to Helms, the high I.P. rates within this rectangle are also the reason why the Industrial Commission is reporting a slow and gradual increase in the rig count. In fact, of the 191 drilling rigs that are currently operating in the state, 140 are concentrated within that rectangle.
“We used to talk about the need to have 90 wells completed each month in order to maintain production,” states Helms. “But when you focus in a high I.P. area, you can get increased results with fewer wells.”
Helms states that because of the high concentration of rigs in the high I.P. area, the state was able to show an increase in production even though only about 70 wells were completed.
Currently, the state has over 600 wells waiting on completion. But as winter weather and spring load restrictions go away, Helms expects to see a big surge in well completions.
With regard to producing one million barrels of oil per day, Helms anticipates that the state will reach that number by the time April’s oil production numbers are in.
“I’m still focused on March, but hedging a little toward April, for that magic one million barrel a day number,” states Helms.
Moving forward, there are a number of factors that still threaten to impact North Dakota’s oil production numbers. Factors such as the Bureau of Land Management’s rules regarding hydraulic fracturing, the state’s hearing regarding flaring and natural gas capture, and the Industrial Commission’s work regarding methane emissions.
Despite these factors, Helms is confident that once the wet part of the spring is over, and the state sees a surge in production that takes them over one million barrels a day of oil production, they will continue to produce at that level. And that will occur regardless of the production restrictions that will likely be imposed by the state to curb flaring or the BLM to manage fracking on federal lands.
There are still many unknowns concerning what kind of policies the state will adopt to achieve its goal of 90 to 95 percent capture by 2020, which is what makes the upcoming hearing on April 22 in Bismarck so important.
“We are working on a model that was devised in the late 80s,” states Helms. “That model does not work with the type of wells that are being drilled today.”
The Industrial Commission hopes to hear testimony of a technical nature on how to address things like multi-well pads and what kind of production restrictions should be appropriate for wells that are connected to gathering systems, so it can form policy that will curtail flaring and promote capture without damaging the economics of oil production.
The hearing is scheduled to start at 8 a.m. at the Industrial Commission offices. Those who are prepared to give testimony will sign in and will be called according to the order in which they signed in. Telephone testimony will not be accepted and the commission asks those giving testimony to do their best to not repeat information that has already been given.