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North Dakota Ends 2011 on Record-Setting Note

With its drilling rig count creeping up above 200, North Dakota ended 2011 on the high side of all-time production totals for oil and natural gas in December, according to the state's Department of Mineral Resources. More than 95% of the production was from the Bakken and Three Forks formations.

"Warm, dry weather through the fourth quarter of 2011 increased hydraulic fracturing activity and rapidly increased production," said department Director Lynn Helms. "As a result, even with the rig count up very slightly, daily production increased about 5%."

Preliminary year-end statistics placed December gas production at 16.8 Bcf and crude oil at 16.5 million bbl, along with daily all-time high averages for both: 544 MMcf/d of gas and 534,880 b/d of oil.

Helms said daily gas production increased by about 22 MMcf/d, although processing plant and gathering system construction slowed due to colder weather. "U.S. natural gas storage is 33% above the five-year average, meaning low prices [will remain] for the foreseeable future," he said, reiterating that North Dakota's shallow gas exploration is not economic at current prices.

With a current oil-to-gas price ratio of 41-1, gas delivered to Northern Border Pipeline at Watford City was priced down to $2.06/Mcf at the end of last year, Helms said. Gas is uneconomic at that price, but natural gas liquids are still economic, and the first new gas processing plant in the state opened Jan. 20, which should result in a decline in the percentage of gas being flared, he said.

Helms reported that delays or the possibility of no development of TransCanada Corp.'s Keystone XL pipeline and the bottleneck at the Cushing, OK, hub are driving increasing amounts of the state's burgeoning oil supplies to railroad transportation, destined for places commanding a 19% discount to the New York Mercantile Exchange/West Texas Intermediate price.

Rig counts are increasing slowly, said Helms, who reported a flat 199 total in November and December, though the rig count was up to 203 last week. Requests for permits, however, continue to be high, he said. The number of wells on federal land in the Dakota Prairie Grasslands is up to five, he said.

Crude oil production in North Dakota has been surging higher over the last few years. According to data from the North Dakota Oil & Gas Division, the state's crude production rose exponentially from 3.57 million bbl in January 2007 to 16.58 million bbl in December.

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