Shale Daily / NGI All News Access

North Dakota Again Busts Output Records, Straining Infrastructure

North Dakota continued setting new oil and natural gas production records in April, but drilling equipment shortages grew, increasing the estimated number of idle wells by 76 in April.

Crude oil pipeline takeaway capacity is nearly 30% below production levels, but rail and truck transportation are "adequate" to keep up with the state's near-term production projections, said state Department of Mineral Resources Director Lynn Helms, who released the latest information Tuesday.

Another unwanted upward trend was found in the percentage of associated natural gas being flared, rising to 34% in April, although still below the all-time 36% high last September.

"The trend should turn downward in the coming months as new processing plants and gathering systems come online," he said.

For April the new preliminary all-time highs for oil were 18.2 million bbl, or 609,371 b/d, compared to 17.9 million bbl and 577,478 b/d in March; and for natural gas were 19.5 Bcf, or 650 MMcf/d, compared to 19.3 Bcf, and 622 MMcf/d, in March. The rig count was 209 in April, with an all-time high of 218 on May 29 this year, and 205 in March. In May the total rig count was 211.

The Bakken boom continues what was seen last year when the play ramped up significantly, as noted by Ernst & Young LLP this week (see Shale Daily, June 20).

Rigs capable of working below 20,000-foot depths remained at 95% utilization in April, while shallow well rigs working at 7,000 feet depths or less had a 50% utilization rate. "Drilling permit activity is high, but well below record levels," Helms said.

Low natural gas prices are expected "for the foreseeable future," he said. North Dakota shallow gas exploration is not economic at current prices and the delivered gas price to Northern Border Pipeline in Watford City is down to $2.03/Mcf, resulting in an oil-to-gas ratio of 36:1, using a nonenergy equivalent unit basis for the price comparison.

North Dakota's sweet crude posted price to the New York Mercantile Exchange-West Texas Intermediate (Nymex-WTI) discount dropped in April to minus 12%; the Nymex-WTI to Brent discount stayed at minus 15%.

RBN Energy LLC analyst Sandy Fielden said the Bakken Shale's relatively low posted prices will continue to give those supplies advantages in delivered costs in the current oversupplied market. This makes the "complicated rail [delivery] options" more useful.

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