Lower oil prices could hurt growth in ND oil production

BISMARCK - With oil prices on the move, pressure on North Dakota oil and gas production may be mounting. In his monthly update on the state's energy industry, North Dakota Director of Mineral Resources Lynn Helms said Wednesday that operating cos...
Oil rigs like this one are common in the Williston Basin region of western North Dakota. Special to The Forum

BISMARCK – With oil prices on the move, pressure on North Dakota oil and gas production may be mounting.

In his monthly update on the state’s energy industry, North Dakota Director of Mineral Resources Lynn Helms said Wednesday that operating costs for oil companies are up significantly from a year ago. Meanwhile, the price of oil has been dropping.

Wednesday’s sweet crude price was $66.25 per barrel, a nearly $20 drop in price from July.

Helms said Burke, McLean and the combined area of Bowman and Slope counties are currently “not economic” to drill wells, with the breakeven price of $81, $73 and $75, respectively, potentially putting a few at risk.

“(It’s) less than a 10 percent impact on overall rig utilization, but we do have three counties that are not economic at this point with oil prices, and we don’t really know where oil prices are headed,” Helms said.

He said dropping oil prices are affecting the global market. For example, Saudi Arabia, which needs $92 per barrel to satisfy its current government budget, puts them below breakeven in terms of world oil prices.

“Not only is North Dakota under a lot of pressure, but the OPEC countries are under a lot of pressure, too, so we’ll have to watch carefully and see what happens,” Helms said.

Growth in oil production in August was half – less than 2 percent – of what it was in August 2013. The normal August production growth is about 4 percent, he said.

The preliminary oil production figure for August is just over 1.1 million barrels per day.

The No. 1 impact limiting production growth, Helms said, was new requirements on natural gas capture plans, resulting in some operators delaying completions and slowing drilling to arrive at the Oct. 1 capture goal set by the Industrial Commission.

“I talked to two different operators. Both had postponed anywhere from 20 to 40 completions because they want to arrive at that 74-plus percent capture,” Helms said.

Natural gas captured in August lost some ground – about 1 percent, he said. In July, 74 percent of the natural gas was captured, decreasing to 73 percent in August.

Gas capture in the Bakken, excluding the Fort Berthold Indian Reservation, was 74.4 percent vs. 64.6 percent on the reservation, an issue that will be ongoing, Helms said.

Wednesday’s rig count was 190, down 13 percent from the all-time statewide high of 218 on May 29, 2012. The number of rigs decreased in the five most active counties, with Divide County seeing the sharpest decline by 38 percent.