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Bakken oil play here to stay

Posted 7/21/15 (Tue)

By Amy Robinson
Farmer Staff Writer

The petroleum industry is one of the largest basic-sector industries in North Dakota. The economic effects are felt statewide, making the industry one of the key forces of North Dakota’s economy. That was the universal message being given by the four featured speakers at last week’s seventh Annual Bakken Rocks CookFest event in Alexander.
The four featured speakers included Ron Ness with the North Dakota Petroleum Council, Kathy Neset with Neset Consulting, Justin Kringstad with the North Dakota Pipeline Authority, and Alison Ritter with the North Dakota Department of Mineral Resources.
“What is happening here in North Dakota never fails to amaze me,” said Ness. “What we need to continue educating people on, and not just in McKenzie County, but the whole state and the entire country, is energy. We also need to show the significance and the ramifications of what a million barrels of oil a day means to us, our state, our country, and the world.”
In April, North Dakota surpassed one million barrels of daily oil production for the first time, putting the state in an exclusive group of only a few countries, states, provinces, and oilfields ever to do so. As of 2014, there were only 17 countries that could produce one million barrels per day or more. And only five states were producing at least one million bopd (barrels of oil per day) at one time including Alaska, California, Louisiana, North Dakota, and Texas. But only Texas and North Dakota are currently producing more than one million barrels per day.
“One million barrels means two things,” said Ness. “First, it means that we have $50 million per day of economic activity. Second, the state gets to collect $11 million per day in oil and gas extraction and production taxes. And currently, there are only 19 countries in the world that produce that much. North Dakota is a top world producer, and North Dakota is providing energy security.”
One million barrels of oil production per day meets the needs of 75 percent of our nation’s average daily imports from Saudi Arabia, 13 percent of our nation’s total daily imports, three times the fuel needed by the entire U.S. military per day, and 11 times the fuel needed by the U.S. Navy per day.
The industry’s economic impact has grown by 750 percent since 2005, keeping pace with the 780 percent increase in oil production since that time. This represents a 303 percent growth in total jobs supported by the industry since 2005 and a 992 percent increase in direct jobs. Which means that in 2013, there were 55,137 direct jobs and 26,403 secondary jobs.
Every one dollar spent by the industry results in an additional $1.48 in economic activity, sending ripple effects throughout North Dakota’s economy. In 2013, the oil and gas industry contributed a total of $43 billion to North Dakota’s economy. The benefits of the economic contribution from the oil and gas industry in North Dakota have far outreached just the oil and gas industry.
In 2013, retail trade benefited with $11.3 billion in revenue; households benefited by $9.3 billion, which included $1.43 billion in royalties, $300 million in lease bonuses, salaries, wages, and other income; the government benefited with $4.4 billion; the finance, insurance, and real estate benefited with $4.5 billion; and other services that benefited financially included business and personal services, communication and public utilities, professional and social services, construction, manufacturing, transportation, and other various agriculture and mining sectors.
“Our oil is a high-grade oil and we get a premium,” said Neset. “We are the largest oil play in the lower 48 states. Why is the Bakken so important? The Bakken is king. It’s where the money is.”
According to Neset, people depend on oil much more than they really know. Crude oil, Neset says, is in almost everything we use on a daily basis including fuel oil, plastics, food - such as the prep equipment and the packaging for the food, synthetic fabrics, asphalt, cleaning products, medicines, lubricants, synthetic rubber, and cosmetics. Life without crude oil would be very different.
“When we’re looking at North Dakota,” says Kringstad, “we always need to be cognizant of what’s happening in the oil and gas markets and the shale plays around the country, and even around the world.”
Currently, North Dakota has two crude oil refineries, the Dakota Prairie in South Heart, which refines 20,000 bbls per day and the Tesoro in Mandan, which refines 68,000 bbls per day. Additionally, the state has 23 gas plants that operate in North Dakota with enough capacity to process 1.39 billion cubic feet per day of natural gas. And in 2014, 24,012 jobs were supported by oil and gas extraction and direct support activities.
Each drilling rig results in about 177 direct and indirect jobs. In 2014, the average wage in the oil and gas extraction industry in the U.S. was $99,841. That was 109 percent above the statewide average wage of $47,779. Since the first North Dakota Bakken well was drilled in 2006, oil and gas production and extraction tax revenues have increased 1,699 percent.
“This is what the Bakken has done for us,” said Ritter. “We’re producing a massive amount of oil per day and companies are getting better and better at operating. Operators are getting better at doing more with less.”
According to Ritter, the first barrel of oil produced in North Dakota was in April of 1951. The ‘first’ billionth barrel of oil was produced in October of 1989, the ‘second’ billionth barrel of oil was produced in November of 2011, and the ‘third’ billionth barrel of oil was produced in January of this year. Ritter says it is estimated that North Dakota will produce its ‘fourth’ billonth barrel of oil sometime in 2018.
“I’m pretty sure that the Bakken Shale oil play won’t be done for a very long time,” said Ness. “I can say that I’m pretty sure everyone in this room will be long gone before the oil play is done in the Bakken.”