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Oil prices aren't the only thing slowing down the oil field

Posted 3/04/09 (Wed)

By Tina Foreman
Farmer Staff Writer

It’s not uncommon to hear about the oil field slowing down because of low oil prices, but is price the only factor affecting the current slowing of the oil field?
As oil hovers around $40 per barrel there are 54 wells being drilled in North Dakota as of Monday, March, 2, 2009 with eight of those rigs located in McKenzie County. That is down from 90 rigs statewide and 22 in McKenzie County on Oct. 27, 2008 when oil was at $62 per barrel.
While oil prices remain a big factor in how busy the oil field is, right now weather is also playing a big factor in the amount of activity.
According to Lynn Helms, director of the North Dakota Industrial Commission Department of Mineral Resources, the Bakken play in McKenzie County has a break-even price of $35 - $40 per barrel, which is right where the price of oil has been sitting. So why has the oil field slowed down so much in recent months?
“Heavy snowfall has plugged all of our lease roads,” says Mike Juma, St. Mary Land and Exploration Company production superintendent. “It is costing oil companies a lot of money to keep locations and roads open. So marginal wells are being shut in due to economics. It just isn’t economical to keep them going with all of the added cost right now. Since we started plowing in December, I would say we’ve spent around $100,000.”
North Dakotans are used to cold and snowy winters and so is the oil field. But with this winter being more extreme than normal, even the heartiest workers have been forced to shut down operations at times.
“It’s not safe to have workers out when it is snowing and blowing so bad that you can’t see or when it is extremely cold,” adds Juma. “We also have to think about how the cold affects the equipment, because things tend to break a lot easier when it’s cold and that just adds to the cost of a job. Sometimes it’s better to just shut in a well until the weather is better or the price of oil goes up.”
According to Juma, St. Mary Land and Exploration Company has only shut in five percent of its wells, but he has talked with other smaller companies who have decided to shut in a lot more or all of their wells.
“I talked with a small company the other day and they’ve decided to shut in all of their wells,” says Juma. “They didn’t even hesitate. When things get better either weather-wise or price-wise they plan to bring the wells back online. But until then, they just can’t afford to keep fighting the weather.”
Another issue causing companies to shut in wells is the slow speed of trucking oil out. It is difficult for trucks to get anywhere during bad weather conditions, which also slows down production. Some companies have been forced to shut in wells because the oil tanks are full, and until they can get the oil hauled away, they are forced to stop production.
“Every company has marginal wells so we are all watching prices and waiting,” comments Juma. “Right now we are just waiting for things to get better and we know they will. It’s just a matter of time. Spring will be here eventually.”
Although spring will bring warmer weather, and if oil prices continue on their current upward trend, higher prices, it is also expected to bring problems of its own.
“Spring will bring its own weather issues, but they shouldn’t be as bad as the issues of this winter,” says Juma. “Our other concern is getting wells back online without problems. When a well is shut in there is always the concern that there will be problems getting it back online. It could be a stuck pump or something more severe which requires a workover rig, and that is very expensive.”
North Dakota has weathered its share of oil field ups and downs, and pretty much everyone in the oil field agrees that it is only a matter of time before things start looking up again.