North Dakota’s providing an endless bounty, it seems. May saw oil production in that state shoot over 800,000 barrels per day, while the number of operational rigs reached a record high, reports The Globe and Mail. According to North Dakota’s Mineral Resources Department, output for the month of May was up by 2 percent (that’s abut 16,277 barrels per day), thus hitting an all-time high of 810,129 bpd. Considering that May actually saw increased rainfall in the state pose obstacles to further drilling, that’s pretty impressive news.
Since 2008, oil production in North Dakota has risen fivefold (at that time, the state was producing around 100,000 bpd), thanks in largely part to the still-controversial practice of fracking (horizontal drilling and hydraulic fracturing). Efficient fracking-led development of the enormous Bakken shale has caused North Dakota to swiftly become the second-largest oil producing state in the U.S., after Texas.
As of now, there are 8,915 (and counting) operational wells in North Dakota. However, the number of rigs that are drilling new wells through May was just one more (187) than in April. That’s about 14 percent below the record of 218 set that month last year. Nonetheless, completed wells increased by 10, to hit 143 over the month.
Due to the inclement weather conditions, it has been estimated that further serious expansions and increases will come well after May. By 2014, for example, North Dakota estimates production to hit and possibly surpass 850,000 barrels per day.
Reuters reports that Lynn Helms, director of the state’s Department of Mineral Resources, expects Q3 production to beat out these numbers, with at least another 60,000 barrels per day of production added to present tallies. That increase is due to come from the completion of wells that have already been drilled. Reuters quotes Helms:
“We think that June, July and August production increases will definitely exceed the 16,000 barrel per day increase we saw in May. We’re anticipating production increases of 20,000 bpd a month or more. We expect production will be higher than we anticipated for the revenue forecast.”
The inclement weather mentioned earlier caused average time between initial drilling of a well and its completion to stretch to 92 days, but that’s expected to contract swiftly enough as the weather improves. As of the end of May, there were almost 500 wells already drilled that were awaiting completion.
However, the Bismarck Tribune notes that gas continues to be flared off at levels of upto 29 percent as of May. North Dakota continues to see new natural gas processing plants and fresh pipeline projects get into development, and as they begin to come online, this level should begin to decline in the near future.
Currently, the state can process about 1 billion cubic feet per day. However, total capacity should peak at around 1.5 billion cubic feet per day. For the moment, though, flaring of natural gas remains a bit of a problem for North Dakota.
On a national level, the U.S. Energy Department’s Energy Information Administration estimates that just 1 percent of all natural gas is flared. Meanwhile, North Dakota continues to flare nearly 29 percent of all its produced gas. Clearly, there’s a mismatch between production levels and transport capacity, and that’s where the action is. Expect a lot of new pipelines and other transport models to pop up in order to solve this pressing problem.
In other news, Monday saw crude oil futures rise slightly, partly due to China’s GDP growth slowing to 7.5 percent over Q2. That’s the ninth quarter out of the last ten where China’s GDP growth rate has declined, which is certainly something to think about. On the other hand, June saw China’s oil demand shoot up to its highest level in four months, primarily due to refineries coming back online after maintenance work.
Reuters reports that Brent crude front-month was up 28 cents, at $109.09/barrel, while U.S. oil was up 37 cents at $106.32/barrel. U.S. crude volumes were 36 percent lower than the 30-day moving average, while Brent volumes listed 7 percent lower. Over summer, in general, demand in the U.S. has rallied, causing rises in Brent and U.S. crude, though the recent strife in Egypt has exerted significant pressure on questions of international supply.
