October 23, 2013

State sets new record for oil production

By Kate Ruggles
Farmer Staff Writer

As projected, the summer months were exceptionally good for oil production in North Dakota. It seemed like an extended period of time that North Dakota’s production numbers were in the 700,000 barrels of oil per day range. But after a slow winter and wet spring slowed production and well completions, the North Dakota Department of Mineral Resources finally reported hitting the 800,000 barrels of oil per day mark in May of 2013.
Then, just three months down the road, in August the Department of Mineral Resources (DMR) reported that the state has blown through the 900,000 barrels per day mark, and predicted that production could reach one million barrels per day by the end of the year. That is if rain keeps load restrictions to a minimum.
According to Lynn Helms, director of Mineral Resources for the North Dakota Industrial Commission, North Dakota produced 911,000 barrels of oil per day and over one billion cubic feet of natural gas per day during the month of August.
“That is far more gas than we have ever produced in North Dakota,” states Helms.
McKenzie County continued to lead the state having produced roughly 272,876 barrels of oil per day, or a total of 8,459,147 barrels of oil, and a total of 11,814,596 mcf of natural gas, or 381,116 mcf of natural gas daily in the month of August.
The summer surge in production has not only set new records and given state leaders a glimpse of what may be to come, it has also put the state well above its revenue forecast for the biennium.
“Producing 900,000 barrels of oil per day puts us well above the revenue forecast for the biennium. And the price of oil is $15 above what was planned for in the revenue forecast,” states Helms.
Helms states that being in the 800,000 barrels of oil per day range gave the state a cushion in its revenues. But being in the 900,000 barrels of oil per day range only solidifies that financial cushion.
Despite the encouraging numbers, Helms is concerned over a drop in the amount of well completions from July to August.
“One big item of concern and one I have not found an answer for yet is why well completions fell so much in August,” states Helms.
According to Helms, there was a record number of completions in July at 251. However, in August, the number of completions fell by 120, to 131.
“I have placed calls to some frack simulation companies, but have not gotten any call-backs, so I do not have any answers,” states Helms. “The only answer I have been able to come up with is road construction. Around the end of July and the first part of August, every single paved and gravel road in western North Dakota went under construction, so it became difficult to move equipment around.”
Helms reports that there is a fairly large backlog of wells, roughly 450, waiting on frack service.
The talk of  road construction being the possible culprit for slowing well completions in August gives way to another concern - the impact of October’s unseasonal moisture leading to mandatory load restrictions in McKenzie County and voluntary load restrictions in Stark County.
“Stark County was also talking of enforcing a mandatory road closure if the voluntary request did not get trucks off the roads,” states Helms.
According to Helms, the impact will be seen mainly in well completions, rather than the number drilled, as the bulk of drilling in McKenzie County is now multi-well pads.
“More than likely, rigs will be able to keep operating. But completion requires transport of heavy casings, etc.,” states Helms. “It is at the point now where we have lost 10 percent of our working days. That is 10 percent less wells completed and 10 percent less production. While this is significant and could postpone the one million barrels of oil per day mark, it will not stop it.”
Helms also noted there was a high amount of permitting during the months of August, September and October, in order to help operators prepare for the winter months. And that the DMR has filled 18 of 22 newly-created positions.
“During the last legislative session, 22 positions were authorized for the DMR,” states Helms. “As of this morning, 18 of those positions have been filled. This is very significant for us.”
Helms states the new positions will allow the DMR to maintain a high profile in inspection and enforcement, both in the field and in the office. The new employees will aid the department in monitoring production, making sure reports are in, ensuring that wells are completed properly and that wells have been permitted properly.
On a final note, Helms states that the North Dakota Bakken has been a game changer in terms of the global oil market.
“The Bakken introduced Shale oil to the world and changed world markets,” states Helms, “to the extent that North America could become the next oil exporter and completely self-sufficient in terms of oil and gas.”