Wells are coming back online in North Dakota and that is boosting the state’s production up over the million barrel per day mark once again — but the boost could be short-lived, state officials said Tuesday. Soft demand and prices are likely to drive an up-and-down pattern in the state’s crude oil and natural gas production for the next two years.
North Dakota reported 1.04 million barrels of crude oil production for July and 2.095 billion cubic feet of natural gas production along with a 91 percent gas capture rate on Tuesday, Sept. 15.
That’s represents a 16.5 percent increase in production for both oil and gas, and a 19 percent increase in gas capture volumes.
But there haven’t been enough new well completions to back up these production gains from wells being put back online, North Dakota Director of Mineral Resources Lynn Helms said. Natural base decline will take hold quickly for Bakken-type wells, meaning production will drop quickly if new wells are not brought online soon.
It takes around 70 new wells per month to sustain production in the 1.25 million barrels per day range. In May, however, just 12 wells were completed, Helms said. In June, 37 were completed and in July 59.
Helms said the state is also only running 10 rigs right now, and it’s not likely to see more any time soon. Oil prices are expected to remain quicksand soft amid corona crushed demand and a world supply glut caused by the Saudi-Russian price hustle earlier this year.
Price points to return wells are in the $35 to $40 range, Helms said. For frac crews, it’s $45 to $50. Drilling rigs want $55 to $60 oil.
Were the state’s oil and gas companies to suddenly complete all the drilled but uncompleted wells in inventory, Helms said it would still take six more rigs than are currently operating to sustain production at a million barrels per day.
The state is now running about five hydraulic fracturing crews, Helms said. But winter is coming. The season for hydraulic fracturing is ending. That makes the more likely number to soon be one, or perhaps two, frac crews. So suddenly completing all DUCs in inventory is not likely.
North Dakota also has two rigs running different projects right now besides oil production, Helms added, making its real total 12.
One of these extra rigs is operating at Center to drill a well that will be used to research carbon capture and storage. The other is drilling what will be the first mid-continent slurry fracture injection well in the United States, to explore the possibility of injecting tenorm into the Broom Creek formation 7,000 feet (1.5 miles) below the surface of the earth.
North Dakota still, as of July, had 3,700 inactive wells representing about 276,000 barrels per day in production, according to Pipeline Authority Justin Kringstad.
He thinks those wells have all likely been put back into production as of September, which will North Dakota production above one million barrels, at least for a little while.
“But if we do not have the completions backing up that growth as the shut-ins come back online, we could very quickly see this up-down motion here during the second half of 2020,” he said, referring to a graph of production scenarios.
Most projections surrounding energy don’t show pre-COVID demand coming back until late 2022, Helms said.
“So we are facing this for a couple of years, this sort of up and down being driven by West Texas Intermediate prices and the desire for companies to maintain their production and keep their production profile moving forward, so, yeah, we could be playing this game for a couple of years,” he said.