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ND oil production up 1 percent in March

WILLISTON, N.D.--Fracking crews were busy in North Dakota in March, bringing the month's oil production up 1 percent to just under 1.2 million barrels per day and surprising state regulators.

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Roughnecks wrestle pipe on a True Company oil drilling rig outside Watford, North Dakota, in this file photo taken October 20, 2012. REUTERS/Jim Urquhart/Files
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WILLISTON, N.D.-Fracking crews were busy in North Dakota in March, bringing the month's oil production up 1 percent to just under 1.2 million barrels per day and surprising state regulators.

Lynn Helms, director of the Department of Mineral Resources, said Wednesday he anticipated another drop in oil production due to low prices, but operators completed an estimated 189 new wells in March, preliminary figures show.

North Dakota has been seeing an increase each month in the number of wells waiting on hydraulic fracturing crews—coined a "fracklog"—as operators wait for oil prices to rebound.

But that number decreased from 900 to 880 in March, likely a result of the state tax incentive known as the small trigger and the need for companies to maintain some cash flow, Helms said.

The state had 12,439 wells operating in March, the preliminary figures show, which is an all-time high.

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Four companies—Hess Corp., Continental Resources, XTO Energy and Burlington Resources—made up the bulk of the new wells that were completed in March, Helms said. But companies EOG Resources and Marathon Oil have indicated they plan to hold off completing new wells as long as they can, he said.

Helms said he expects oil production to hold steady between 1.1 million barrels a day and 1.2 million barrels per day until mid-2016, unless oil prices exceed $65 or $70.

"It looks like a pretty flat picture as we project out until this time next year," Helms said.

The number of drilling rigs operating in the state was 83 Wednesday, a 10 percent drop since April and the lowest number since January 2010. The record was 218 in May 2012.

"We think we're at or near the bottom," Helms said.

Natural gas production increased 3 percent in March, but the percent of natural gas flared during the month was unchanged at 19 percent. About 10,000 barrels a day of oil production was curtailed in March so companies could meet gas capture targets set by the North Dakota Industrial Commission, the department said.

Helms said he thinks the state's new rule to condition Bakken crude oil made a difference in last week's oil train derailment near Heimdal. In that case, Hess Corp. submitted a test that showed the vapor pressure of the oil was 10.8 pounds per square inch when it was loaded in Tioga.

The order, which took effect April 1, requires companies to treat crude oil so it has a vapor pressure of no more than 13.7 pounds per square inch.

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"We do think it helped," Helms said. "I think if you compare the video and the photographs from Casselton to Heimdal, you see a different character to the derailment and the following fire."

A vast majority of operators are complying with the new rules, but regulators have not yet had time to verify whether about 4,000 wells are in compliance, Helms said.

Companies can meet the standard by operating their equipment at specific pressures and temperatures. If they choose an alternative method, companies need to submit documentation of a vapor pressure test each quarter.

Operators of about 2,600 wells plan to submit tests to the Department of Mineral Resources. So far, regulators have reviewed more than 2,500 tests and all but eight, or more than 99 percent, were in compliance, Helms said.

"It's a little bit overwhelming when you look at the amount of data they're processing," Helms said.

For another 9,800 wells, the Department of Mineral Resources will verify each quarter that equipment is being operated at the right pressures and temperatures. So far, inspectors have reviewed just under 5,800 sites, or about 60 percent, Helms said. Of those, 90 percent were in compliance, he said.

Those that are out of compliance are given 48 hours to adjust equipment and retest, he said.

The amount of crude oil transported by rail out of North Dakota fell slightly in March to below 700,000 barrels per day, according to estimates from the North Dakota Pipeline Authority. About 54 percent of oil was transported by rail while 40 percent was transported by pipeline.

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Director Justin Kringstad attributed the decrease in rail transportation to a drop in oil production in Montana, which he said has no active drilling rigs, a decline in the amount of oil being trucked in from Canada and the Double H Pipeline that recently went into service.

 

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