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Another big month for oil production

Posted 7/22/14 (Tue)

By Kate Ruggles
Farmer Staff Writer

As was predicted when North Dakota’s oil production numbers were released this past June and the state finally reached the milestone of producing one million barrels of oil per day, the expectation was that oil production numbers would continue to grow. And May’s production numbers now only corroborate that belief.
“Oil production is up again,” states Lynn Helms, director of Mineral Resources for the North Dakota Industrial Commission. “But it is still somewhat less than expected.”
Helms’ statement is both praise for the continued growth in North Dakota’s oil production and a declared expectation that a production surge is yet to come which will yield even higher growth percentages than what the state saw from April to May.
In May, the state saw a 3.6 percent increase in crude oil production with a record 1,039,635 barrels of oil being pumped from the ground per day. The May numbers also reveal that the state’s natural gas production increased to 1,191,628 MCF per day, which is a five percent increase over the previous month.
McKenzie County continues to lead the state in oil and natural gas production. During the month of May, the county produced 10,458,768 barrels of oil and 15,341,892 MCF of natural gas.
During May, North Dakota had 10,892 producing wells. Of those wells, 7,526 are unconventional Bakken and Three Forks wells and 2,498 of them are in McKenzie County. That means that McKenzie County contains 33 percent of the state’s total producing wells.
Despite these great numbers, the North Dakota Industrial Commission feels that there is still an even greater increase in production yet to come during June, July and August.
“May was still a bit cool and windy, in terms of weather,” states Helms. “We did not have to pay attention to the wind, but the way that wells are hydraulically fractured with the coil tubing and the completion equipment up in the air quite a ways, the wind makes a significant impact on well completion. Therefore, though we thought that we would end May with a reduced number of wells waiting completion, we actually finished the month with 10 more wells waiting on completion than what we started with.”
With June’s production numbers scheduled to come in next month, Helms is confident that the state will see a big surge in well completion, which should lead to some rapid production increases.
The rig count is still hovering at roughly 190 rigs. But according to Helms, one major operator has plans to add at least six drilling rigs before the end of the year.
Helms also states that permitting activity has already risen significantly.
“Operators have already begun to focus on next winter,” states Helms. “Particularly because the Industrial Commission has implemented policies regarding gas capture plans, so the focus of most operators is becoming more long term.”
Operators are not only permitting wells that they need to get drilled this summer, but Helms states that they are already looking at the construction season with the understanding that somewhere between Halloween and Thanksgiving all of their well pads need to be constructed. And, due to time and cost, that is something they do not like to do in the winter.
Helms states that as far as the current pricing goes, June’s Sweet Crude was $90.03 per barrel, but July’s price dipped to $84.50 per barrel. The price has not been near that low since April, when the price was $85.68 per barrel.
Near the end of 2013 to the beginning of 2014, it was more economical to export North Dakota’s Sweet Crude by rail. But now pricing is such that operators can choose to transport their product according to what is more convenient.
Justin Kringstad, director of the North Dakota Pipeline Authority, states that an estimated 700,000 barrels of North Dakota Sweet Crude are transported by rail per day. But two projects are in motion to add pipeline options to North Dakota oil producers.
“The Enterprise Pipeline went public on June 24 at the Governor’s Pipeline Summit, and Energy Transfer Partners announced a successful open season the following day on their pipeline project,” states Kringstad.
According to Kringstad, both projects are 30-inch pipeline. The Enterprise Pipeline is still in the business development stage and working to gather the commitments for the project.
The Energy Transfer Partners project, however, had an open season back in March, and on June 25, the company announced it has the commitments they need.
According to Kringstad, Energy Transfer Partners are now proceeding with purchasing pipe and will begin the regulatory process in order to develop the project.
The Energy Transfer Project will transport crude east toward Illinois, at which point it would have three options. It would either be consumed in the Great Lakes Refining Center, it would move south to the Gulf Coast Refineries or, if plans continue to develop a rail center, the product could also be moved farther east.
“The proposed Enterprise Pipeline is different,” states Kringstad. “It will head down to Cushing, Okla. But on its way out of North Dakota, it will head west through Montana, Wyoming and Colorado, with the intention of picking up crude oil production from some of the growing areas of those regions. Therefore, it would not only serve North Dakota, but some other Shale formations in the Rocky Mountains.”
Helms is confident that because the summer weather is so conducive to production and well completions, the months of June, July and August will show a big surge in oil and natural gas production, even though the state has increased its efforts to curtail natural gas flaring.