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North Dakota Exploration Continues at Record Pace

North Dakota continues to set all-time records for oil and gas production based on the most recent statistics available as of the end of October, according to Lynn Helms, director of the state Industrial Commission's Department of Mineral Resources (DMR). He noted that the oil and gas industry still plans to invest more than $3 billion in the state through 2013.

Separately the federal Bureau of Land Management (BLM) reported Thursday that the Dakotas and Montana set a record for oil and gas lease sales in fiscal 2011, with parcels in western North Dakota commanding the most revenue. Overall the sales revenues shared between the states and federal government totaled nearly $110 million, with North Dakota accounting for most of the sales with $104.2 million.

BLM said its lease sales continue to draw more interest in North Dakota among the three-state region, which includes South Dakota and Montana. All of the 80,416 acres of BLM land offered in North Dakota received bids during fiscal 2011, the federal agency said. Most of those leases were within the Bakken Shale and Three Forks formation in the western part of the state.

In North Dakota, with the total rig count one shy of the all-time state record of 201 set earlier in the year, October producing wells (6,202), oil production (488,066 b/d) and natural gas production (506 MMcf/d) all were record highs for the state, which has been boosted by activity in the Bakken Shale.

"The good weather window has now ended, but in October warm dry weather pushed hydraulic fracturing [fracking] activity and production upward," Helms said in his latest director's report on the DMR website."As a result, even with the rig count up only slightly, daily production increased 4%." More than 95% of the drilling is concentrated in the Bakken and Three Forks formations, he said.

Helms said the statistics accumulated in October showed that drilling continued to outpace fracturing services, and there is a need to add about 10 more crews. He based this conclusion on the fact that at the end of October idle wells had increased again to 762, which is about 300 above normal.

The rig count in the Williston Basin is slowly increasing, said Helms. The use of deep-drilling rigs (more than 20,000-foot depths) is currently at about 95%, but utilization of the shallow well rigs (7,000 feet or less) is only about 50%. "Drilling permit activity is high, but still below record levels," Helms said. He expects the November statistics to show a continuing rise in permit activity as operators try to build locations prior to the onset of winter weather.

Daily natural gas production increased as processing plant and gathering system construction activity remained "very high." But with national U.S. storage levels 8.7% above the five-year average, North Dakota shallow gas exploration is not economic at the current price for gas, Helms said.

Gas delivery prices to Northern Border Pipeline at Watford City are down to an average of $3.18/Mcf, according to Helms. "This results in the oil-to-gas price ratio of 31-to-1 even though the Btu ratio is 6-to-1," he said. "The low value of processed natural gas does not justify investment in infrastructure, but the natural gas liquids make gathering and processing of Bakken gas economic."

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