North Dakota on sharp oil and gas growth curve

Lynn Helms, director of the North Dakota Department of Mineral Resources, speaking at the Williston Basin Petroleum Conference in Bismarck, N.D. earlier this year. Image: Brian Zinchuk/Pipeline News

Bismarck, N.D. — The forecast for North Dakota in almost all areas of petroleum production is on a sharp curve upward, with oil and natural gas expected to nearly double in coming years, limited primarily by infrastructure keeping up.

That was a big part of the message by Lynn Helms, long-time director of the North Dakota Department of Mineral Resources, at the Williston Basin Petroleum Conference in Bismarck, N.D. earlier this year.

Helms noted that North Dakota has 14,457 active wells, of which 12,627 are Bakken/Three Forks, and the remainder are conventional.

There are 1,653 inactive wells, and 916 waiting on completion. “It looks like only 110 of those are true what you would call DUCs (drilled, uncompleted),” said Helms. “It looks like industry has given us a new normal, which is 800 wells in the process of finding a frac crew, getting on the schedule, getting the sand, the water and the weather for everything right.”

There’s about a 15-month supply of permitted wells, totalling 1,888. There’s 13,451 wells approved and ready to permit for increased density drilling, or about an 8.5-year supply. “It gives you some indication of at least of how long this industry plans to maintain this drilling activity level.”

He noted their ultimate estimate is 55,000 to 65,000 wells eventually, and just over half are now in the pipeline.

“We’re just ending the first period of the football game. We haven’t even blown the whistle to change ends of the field, in the first period of the football game,” Helms said.

As of the end of 2017, he noted, “Your industry has brought $127 billion of capital from all over the world and put it into North Dakota’s economy. Thank you.”

He said there’s another $348 billion to go over the next 20 years.

Helms noted technology used in the Bakken is being used in the Eagle Ford, Niobrara and Permian shale plays, but new-well oil production per rig is still highest in the Bakken, at approximately 1,400 bbls/d.

Oil prices had, by the time of the conference, reached the point where it was now economical to work beyond the core of the Bakken play. “At today’s oil prices, economics reach way beyond the core, all the way to the Canadian border,” Helms said. “The entire Bakken is at play again.”

Pointing out that the oil industry has seen a trillion dollars of underinvestment during the downturn. “What that means is that some time, not too long after 2020, prices have to make a correction to bring that investment back and bring that production back.

“You bring that to North Dakota and what does that do? We think we see moderate rig growth this year, next year, and in 2020, but in 2021, when we see that price correction, we see rigs coming back, really, really intensely.

“We’re looking at, in the early 2020s, well over 100 drilling rigs. Keep in mind, those drilling rigs are twice as efficient today as they were just three years ago. Three years ago, a rig could get one well a month. Today it’s two wells a month, and many in the industry are exceeding that. Many are approaching three wells a month, and expecting to get another 20 per cent of efficiency out of these drilling rigs,” Helms said.

In forecasting North Dakota’s oil production, the North Dakota Pipeline Authority put out two cases. Case 1 see a rapid rise to 1.6 million bbls/d by 2021, and 2 million bbls/d by about 2024, peaking at 2.35 million bbls/d in 2033. Case 2 starts off slower but has a similar, if lower rise. It forecasts 1.6 million bbls/d in 2024, and a slower rise to 1.95 million bbls/d in 2034, but never quite making it to 2 million bbls/d.

“One of the things we need to think about is how is our crude oil going to get out of North Dakota?” Helms asked. He noted the addition of the Dakota Access Pipeline (DAPL) means there is currently excess pipeline capacity.

“Based on that production growth projection, by 2020, DAPL is totally full. Even expanded DAPL is totally full. Even the refineries that are planned in North Dakota are totally full, which means either a return to rail cars, or we need to have begun, two years ago, planning the next crude oil pipeline.

“We’re looking at Keystone, we’re looking at some other options. We’re talking to industry about it. But my message to you, you’re mainly upstream and midstream folks – if somebody comes to you with a pipeline proposal for an export pipeline – commit barrels. Get the pipeline built, because there is no time to get the project started and permitted,” Helms stressed.

— Pipeline News