North Dakota's just-released oil production numbers are down slightly but state officials don't figure that will be a trend.
Lynn Helms, director of the North Dakota Department of Mineral Resources in Bismarck, said Friday the November figures, the most recent ones available, had a small decline in drilling and there was a very large decline in hydraulic fracturing, resulting in a 2.2 percent oil production rate from October.
"More operators are transitioning to higher efficiency rigs and implementing cost-cutting measures at the end of their 2012 capital budgets, but the primary reason was winter storm Brutus," Helms said in his monthly report Director's Cut.
File Photo • Much of North Dakota’s crude oil is shipped by rail to East Coast, Gulf Coast and West Coast destinations. This photo shows a rail-loading facility in New Town served by the Canadian Pacific Railway.
He said Williams County was impacted the most with Nov. 10, being the snowiest day since 1901.
He also said the idle well count rose sharply, indicating an estimated 410 wells waiting on fracturing services.
Helms said drilling permit activity was lower in December due to the number of holidays. There are no rigs actively drilling on federal surface in the Dakota Prairie Grasslands at this time. However, he said, the number of rigs drilling on the Fort Berthold Reservation has increased to 28 with four on fee lands lands not held in trust by the federal government and 24 drilling on trust lands, or lands held in trust by the federal government.
N.D. oil, gas-producers
Here are the 17 oil and gas-producing counties in North Dakota, according to the N.D. Department of Mineral Resources' Oil and Gas Division:
The number of producing wells in the state in November had a preliminary new all-time high of 8,101.
As of Friday, 182 rigs were actively drilling in the oil patch, according to the department's N.D. Oil and Gas Division.
Helms said more than 95 percent of the drilling continues to target the Bakken and Three Forks formations.
What is ahead for oil and gas development in the state?
North Dakota needs to develop 35,000 to 45,000 new wells to fully develop the state's oil and gas resources, state officials say.
Alison Ritter, public information officer with the N.D. Department of Mineral Resources, said an estimated 200 rigs are needed to develop the spacing units in about 18 years.
"That rig number is constantly going to fluctuate based on market, based on availability of completion crews, based on availability of manpower. But we do know that we need to develop 35,000 to 45,000 new wells," she said.
Ritter spoke recently to the Minot Area Chamber of Commerce's Energy Committee at its monthly meeting. The group meets at Minot's Vegas Motel.
She said Helms, who has developed a statewide model for oil industry-related jobs, expects in about 2020 that North Dakota will peak at about 65,000 oil industry-related jobs. Helms presented his predictions at the North Dakota Association of Oil and Gas Producing Counties' annual meeting in Minot in October.
Ritter said she gets calls all the time from national media asking her to compare North Dakota to other states.
"Every state's different, every regulation is different from state to state," she said. She said it's really important that state's keep up their staffing levels. "Because in the long run the importance is making sure these wells are maintained, making sure they are drilled correctly and under our rules and regulations, and the only way you can do that is to make sure you have the proper staffing," she said.
Ritter said Helms is asking the N.D. Legislature for 23 full-time staff for the Mineral Resources Department. The majority of them will be for the Oil and Gas Division. "Of the 23, 10 will be petroleum engineers and technicians," she said.
Ritter said they have retooled their figure of how long a well will produce in North Dakota. She said that this past summer the North Dakota Industrial Commission, through the N.D. Pipeline Authority, commissioned a study from Bentek Energy on the natural gas approximate capacity needed in the state. "What they found told us the Bakken well life is extended about 15 years because of the natural gas potential," she said. Oil production for a Bakken well is about 30 years.
"There's going to be a shift in these wells one day that shifts it from oil to predominately natural gas so we need to be able to have a processing capacity to keep up with that," she said.
She said North Dakota does not have adequate capacity.
"We are flaring about 29 percent of the natural gas that we produce," she said.
An eternal optimist, Ritter said she likes to look at it that North Dakota is capturing 71 percent, but 29 percent is still a big number.
"We expect we need about 1.4 billion cubic feet of processing capacity in the near future 2014. "With the Bentek study that was commissioned, we estimate we need to double that," she said. She said the Bentek study is a big invitation for natural gas investors to come into the state.
Ritter said Minot has a very diverse economy, with about 1 percent of its economy driven by mining, quarrying and oil and gas extractions, according to the 2010 census.
"You are able to diversify your economy, have all those industries and really branch out," she said.
She said Williston has about 35 percent of its economy driven by mining, quarrying and oil and gas extractions, according to the same census.
Ritter told the group that 2 percent of the oil in the state is recoverable.
She said the Bentek study showed there are areas in North Dakota - mainly Mountrail, McKenzie, Dunn and Williams - that if the price of oil would drop below $50 a barrel, it still would be very economical for drilling.
Ritter said North Dakota has lost some rigs, but also companies are switching to the more efficient rigs.
As for possible production, she said the very high scenario that Helms predicts is about 1.6 million barrels a day.
"That's not for a few years, of course," she said.
"The Bakken changed the game for everybody and it has opened up places like the Eagle Ford (a shale play in Texas). We will compete with them, yes, we will. But I think because of how successful our wells are and how they start out, we are always going to be the leader and we'll always be able to stay up on things," Ritter said.