North Dakota posted production gains in June and almost hit the 1.1 million barrel per day mark, but its full potential continues to be held back by workforce and gas takeaway issues, its top oil and gas regulator said.
The state posted a 3.6 percent increase in crude oil production for the month of June to 1,096,151 barrels/day, North Dakota Director of Mineral Resources Lynn Helms said. Gas production, meanwhile, was up 9.7 percent, jumping from 2.789 billion cubic feet per day to 3,061 billion cubic feet per day.
Helms expects similar growth rates for July, but August will be a bit of a wild card, as North Dakota Pipeline Authority Justin Kringstad explained.
An equipment failure on Sunday at a North Dakota compressor station on the Northern Border line will reduce that line’s gas takeaway by 30 to 90 feet per day.
“That brings the current restricted capacity on the Northern Border pipeline to just over 2 BCF per day,” he said. “The brunt of that capacity restriction will be felt by North Dakota producers.”
According to Kringstad’s calculations, this is likely to result in the loss of 1.4 million barrels of oil production over the next 11 days, translating to a daily loss of around 130,000 barrels. Northern Border anticipates having the line back to full operating capacity by Aug. 25.
Gas takeaway capacity continues to do well in the state, Helms said, with an average 94 percent capture rate statewide. But the state’s oil production is bumping up against its ceiling on gas takeaway. That’s a potentially big limiting factor for further Bakken production growth.
Natural gas prices are on the one hand providing incentive for industry to continue adding gas takeaway infrastructure, but, in the short-term, it’s also an incentive to limit oil production to get attractively priced gas to market.
Another thing that’s hampering the growth of Bakken oil production right now are continued workforce issues. It takes around two months to hire and train a crew, whether it’s a drilling rig, hydraulic fracturing or workover rig crew.
“North Dakota has begun to really focus on career technical education, to grow our own workforce,” Helms said. “But over the next couple of years, (workforce) is really going to be the most difficult hurdle to overcome.”
Standing up seven more rigs at current hiring rates would take 14 to 21 months to accomplish, Helms added.
“Our No. 1 hurdle is definitely workforce,” he said.
Workover rigs right now are 100 percent deployed, Helms added, and have a long wait list.
“We’re hearing from operators that today if they need a worker rig, their schedules are showing that it might be October before they get a rig,” he said. “But you can see the deployment of worker rigs has made a huge impact on our inactive well count. It dropped by 700 from 2448 to 1750.”
North Dakota now has a record 17,284 wells operating in the state.
“So are we at peak production?” Helms said. “No, we really believe that within the next year, production is going to grow to 1.2 million barrels a day. And looking a little bit further out, we think by the end of the 2020s, we can achieve and sustain 1.4 million barrels a day. So it’s a slow growth curve.”
That jives well with a recent survey Helms saw from the Journal of Petroleum Technology that asked operators where prices need to be to justify drilling a new well, and where they need to be to justify substantially increasing their drilling rates.
Operators pegged the slow, steady drilling price as $65 a barrel, and the ramp-up scenario as $98 a barrel.
“So we’re not anticipating a big spike or ramp up in drilling activity again,” Helms said. “Just this slow increase in rig count and frack crews, completing crews, taking us to the end of the year.”
Newly completed wells for June were 53, Helms said, and 74 for July. That’s well above revenue forecasts and is part of the reason Helms continues to predict strong production growth in July.
Rigs are now at 48, Helms said, and frack crews stand at 16, which is about enough to keep up with the drilling rig crews, but not enough to substantially lower the Drilled Uncompleted well counts. Those are now back to a more usual average, however, Helms said, ranging between 300 to 350. That’s down substantially from the 1600 to 1700 that the state’s oil and gas industry had been working through.
