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Winter Storm, Sub-Zero Temperatures Hammer North Dakota Oil, Natural Gas Production
A winter storm last week shut in an estimated 300,000-400,000 b/d of oil production in North Dakota, and producers now must contend with bone-chilling temperatures as they attempt to restart operations, according to the state’s Department of Mineral Resources (DMR).
“If you’ve been dreaming of a white Christmas, you’ve come to the right place,” DMR’s Lynn Helms, director of the Oil and Gas Division, told reporters on Monday. “We had record snowfall in November and record snowfall again in December.”
As blizzard conditions battered the northern Plains last week and into the weekend, “crude oil trucks were not moving, pumpers weren’t on the road, tanks filled up and wells were shut down,” Helms said.
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As a result, DMR estimated that as of Sunday (Dec. 18), statewide oil production was well below 1 million b/d, compared to a monthly average of 1.2 million b/d recorded in October.
The industry “is going to attempt to work this week, but it’s almost Christmas,” Helms said. He cited that below-zero high temperatures were forecast through this week in the Williston Basin, home of the mighty Bakken Shale.
“Once a well goes down in this kind of weather, it can be extremely challenging to get that pumping unit up and running again,” Helms said. He addressed reporters during a press conference to discuss October production figures.
North Dakota’s natural gas production averaged 3.13 Bcf/d in October, down 1% from September. The gas capture rate improved to 95% from 94%, reflecting industry efforts to minimize routine flaring.
The statewide volume of flared gas fell by 7.8 MMcf/d from September to average 149.8 MMcf/d in October.
The price of natural gas delivered to TC Energy Corp.’s Northern Border pipeline at Watford City, ND, had “risen sharply to $6.76/Mcf” as of Monday “due to much colder winter weather and LNG exports to Europe,” Helms said.
The tally of permitted wells in November was 86, up from 77 in October and 65 in September.
Rig Count ‘Stalled’
North Dakota’s drilling rig count stood at 43 as of Monday, compared to monthly tallies of 45, 43 and 40 for September, October and November, respectively.
“The drilling rig count has stalled in the low to mid-forties with a gradual increase expected over the next two years,” Helms said.
He added that, “drilling activity is expected to slowly increase with operators maintaining a permit inventory of approximately 12 months.”
North Dakota’s drilled but uncompleted well count stood at 489 as of October, up from 474 in September.
Completions totaled 58 in November, compared to 54 in October and 81 in September, based on preliminary DMR estimates.
Helms highlighted that the number of active completion crews had risen to 20 just before the blizzard earlier this month, “but there was no completion activity last week and very little is expected this week.”
Globally, Helms said that, “Russia sanctions, China Covid lockdowns and looming recessions have created significant price volatility in an already volatile market.”
North Dakota’s oil production, meanwhile, was “as flat as flat can be” in October versus September, Helms said.
Helms often compares activity in North Dakota with those of New Mexico, a state with similar production levels.
New Mexico saw oil output rise by 3.9% month/month to average 1.62 million b/d in October.
“They just continue to experience those back-to-back production increases like we used to have three or four years ago,” Helms said. “Eventually, the New Mexico play is going to mature like the Bakken and we’ll see that flatten out.”
Helms said that “just about half” of North Dakota’s drilling and completion activity is now taking place in the state’s “Tier 2” acreage. “So a large part of the activity has shifted out of the core area, which continues to experience growing gas-oil ratio, into the much less drilled Tier 2 area…”
The Tier 1 acreage is about 80-85% drilled out, versus about 50% for the Tier 2 areas, Helms said. The untapped Tier 2 reservoirs tend to have a lower gas-oil ratio, Helms said, which partly explains the month/month dip in gas output. This may be “the beginning of a trend which we’ve talked about,” of more economically viable activity in Tier 2 areas because of the advent of three-mile lateral wells, he said.
For 2022 as a whole, North Dakota has seen “a very slow recovery from the pandemic,” Helms said, with “really flat production.”
Major producers in the state are mostly forecasting oil production growth of 1-2% in 2023 versus this year, Helms said.
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