2019 May Directors report

Map of prices for crude oil by region. East and West coast refineries are only accessible by truck or by rail.

The oil industry has continued to exceed its flaring limits, this time with no self-restraint, according to the state’s monthly oil and gas production report.

The numbers, for March production, showed 1.39 million barrels per day of crude oil for March, about 13,000 barrels per day below the all-time high 1.43 million barrels per day set in January.

Gas production, meanwhile, was 2.801 million cubic feet per day. Not only is that a new all-time high, it’s the largest month-over-month increase to date, up from 2.631 million cubic feet per day in February.

Total gas flared in March increased to 555,349, and the percentage flared was 19.8 percent. Industry is supposed to be capturing 88 percent of produced gas.

While flaring has continued to increase, the overall amount of gas captured has also increased, to a new all-time high of 2.246 million cubic feet per day in March. February’s figure was 2.13 million cubic feet per day.

Many producers had been self-restricting production by an estimated 50,000 barrels per day to avoid flaring problems. However, Department of Mineral Resources Director Lynn Helms said that wasn’t the case in March.

“In March, they un-selfrestricted,” he said. “There was little to no restraint in March.”

Most of the flaring, however, will be covered by allowed exemptions.

“There are a ton of filings for exemption under the capacity constraint,” Helms said. “So as plant capacity comes online toward the end of the year, we are looking at doing away with that. But, at this point and time, that is a huge need of the industry.”

The other exemption is for flowback, or initial testing of newly completed wells.

“In the last half of March, we saw a lot of new completions,” Helms said.

Among these was a well that produced 10,000 barrels per day of crude, along with a large volume of natural gas.

That well, and any other newly completed wells, get to test flow back for two weeks, and then get an additional six weeks for flow testing, during which time flaring without restraint is allowed.

There were 62 new wells completed in March.

“It doesn’t look like right now, other than a few very small producers, that there will be any restrictions,” Helms said. “But, we are watching it, and as plant capacity comes online, we are going to have to roll back that plant capacity.”

Wild Basin provided some relief, Helms added, though it’s added capacity was quickly filled.

“That is the story for the rest of the year,” Helms said. “Until we get into the fourth quarter, we’re not going to have the new natural gas infrastructure up and running, so this is going to be a long, difficult battle.”

Helms sees strong indications that production will continue to increase and believes new records are ahead.

Permitting activity, for one, has been robust, coming in at 110 to 130 permits for March. Rig counts have hovered in the 60s, and are expected to grow to keep pace with permitting activity.

Breakevens, meanwhile have continued to drop. There’s now almost nowhere in North Dakota that is unprofitable in the current price environment.

There are 968 wells drilled but not yet completed. Inactive wells climbed to 1,700. Those trends were weather-driven, Helms said, pointing to cold weather during the first half of March.

Now that the weather is nice, he expects the uncompleted and inactive well counts to decrease.

With the load restrictions coming off, we are seeing an increased number of frac crews working,” Helms said. “They were back into the mid 20s and working by the end of March.”

He expects to see 40 to 50 hydraulic fracturing crews working in North Dakota.

“The main constraint will be gas capture,” he said. “And behind that workforce.”

The workforce constraints, however, are shifting. Oil companies have been finding people with CDLs and labor for the hydraulic fracturing crews, Helms said. The crunch now is for gas plant technicians and other such personnel.

“There are 1,800 job openings there,” Helms said. “And the operators are really struggling to fill those.”

A task force has begun to look at what other states are doing to fill such positions, Helms said, and the state is also looking at ways to train juniors and seniors in high school, so they can “walk across the graduation stage on Sunday and onto a job site Monday.”

“We are expecting to grow the workforce by 3,500 people,” Helms said. “So the labor market is only going to get tighter.”


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