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North Dakota Sets New Production Records, But Future Infrastructure Problematic

North Dakota officials on Friday reported monthly records for oil and natural gas production, tempered with nagging concerns about growth outpacing the build-out of more takeaway infrastructure, particularly for gas, in the nation's second largest oil producing state.

Lynn Helms, director of the state’s Department of Mineral Resources (DMR), expressed concern about future "stress" on the gas takeaway infrastructure that could inhibit oil production beyond 2019. Earlier this month, Helms provided a briefing on the issue to the three-member state Industrial Commission (IC), which oversees DMR's oil/gas regulation.

"What to do with all this natural gas we're producing is definitely on the minds of the state policymakers," said Helms. Separately, a Boston-based energy analytical consulting firm, ESAI Energy LLC, cited the possibility of an oil production drag in the Bakken Shale by 2019 because of production growth outpacing infrastructure build-out. North Dakota’s rules limit flaring of associated gas.

Despite the addition of processing capacity over the past two years, and an additional 320 MMcf/d of capacity scheduled in 2018 and 2019, ESAI has concluded that "there still may not be enough capacity in other core counties by 2019 and crude production growth could suffer."

Gov. Doug Burgum expressed the need to address the concern so North Dakota can attract the needed investment to build new takeaway infrastructure, Helms said.

While establishing an all-time high for producing wells (14,250) in October, the most recent month for which there are complete statistics, oil production was 36.75 million bbls (1.19 million b/d), compared with 33.22 million bbls (1.1 million b/d) in September. For natural gas, October production was 63.9 Bcf (2.06 Bcf/d), compared with 58.3 Bcf (1.94 Bcf/d) in September.

North Dakota's rig count was 56 in September and October before dropping back to 54 in November and sliding slightly to 53 rigs as of Friday. Permitting bounced around, going from 104 in September to 147 the next month, and then sliding back down to 119 in November. North Dakota sweet crude prices went from $39.25/bbl to $49.15/bbl as of Friday and $49.75 for November.

Even with the price upswings, there is still reluctance to add a lot of rigs next year -- maybe two or three at the most, Helms said.

With more than 99% of all drilling in the state targeting the Bakken/Three Forks formation, Helms reported that the estimated number of wells waiting for completion keeps growing, hitting 889 in October, an increase of 36 since the end of September.

"These numbers just don't go down, although it is still hard for me to believe that this is the new 'normal' -- 850 to 900 wells waiting on completion," said Helms. He added that estimated inactive wells grew, too, totaling 1,471 at the end of October.

"Unless something changes in the ability to get workers and work force, and add frack crews, this becomes the new normal at close to 900 wells, knowing that the old normal was 300-400 wells."

Another "new normal" for Helms is the well density on the Fort Berthold Reservation, which is double its historic levels.

"We know enough now to say that the well density there is going to be more than double what we were using before, so it looks like there are going to be a lot more potential wells on the reservation lands than what we were using earlier this year," Helms said. "The well density there is much tighter and the Fort Berthold geology is very good."

He said that on the reservation the sweet spots of the Bakken and all three benches of the Three Forks formations can be reached in some cases by exploration/production companies.

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