New wells that were built but inactive because of the harsh winter will be ready for business.
North Dakota's oil output rose in February compared to January, but remained below November's record and below the 1 million barrels/day milestone that observers have been watching for. 2013 file photo of a driller working a rig near Watford City, N.D.
North Dakota officials are predicting a big surge in crude oil output in the next few months as the industry emerges from a tough winter.
About 650 wells had been drilled, but were not producing at the end of February because it was too cold to inject water and chemicals for the final step, called hydraulic fracturing, the state Department of Mineral Resources Oil and Gas Division said Friday.
“As we see winter weather and road restrictions go away, we are going to see a big surge in well completion,” Lynn Helms, the division’s director and North Dakota’s top energy production official, said on a conference call.
The state’s oil output was 951,340 barrels per day in February, up 2 percent from January. But that was still below the record 976,453 barrels per day seen in November, before winter put the brakes on production.
Sometime this year, the state’s output likely will surpass 1 million barrels per day, a symbolic milestone that oil analysts have projected would happen. North Dakota already is the nation’s No. 2 oil-producing state behind Texas. The Williston Basin, which is mainly in North Dakota but also includes wells in Montana and South Dakota, already exceeds 1 million barrels per day.
Helms said February had 18 days that were at least 5 degrees below normal and “a fair amount of windy days,” which also inhibit well completions. The state had 10,186 producing wells in February, with 189 drilling rigs in operation, according to the data.
Once companies begin fracking the already-drilled wells, the state’s monthly production could jump 50,000 barrels per day to 70,000 barrels per day, Helms said. That would be a 5 to 7 percent monthly boost over current output.
Natural gas production also rose in February, but 36 percent was flared, or burned off. That’s expected to drop to below 25 percent later this month as a natural gas processing plant comes back on line, Helms said. North Dakota also plans new rules in June to curb flaring. As a result, well operators may limit pumping of oil and gas until more gas-collection lines are available.
Railroads remained the most common way to ship Williston Basin crude oil to market. They hauled 67 percent, or about 715,000 barrels per day, in February, although that was down slightly from January, according to Justin Kringstad, director of the North Dakota Pipeline Authority.
Kringstad said the price difference between East Coast and midcontinent crude oil has narrowed, leaving less margin for the crude-by-rail industry. Oil trains to the coasts are a more expensive way to transport crude compared to pipelines, but shippers can make a profit if coastal prices are high enough to cover the extra cost.
Three crude oil pipelines are being completed this year in North Dakota. Two will feed the Pony Express Pipeline in Wyoming, which is being converted to carry crude oil instead of natural gas to Cushing, Okla., he said. A third pipeline will carry North Dakota oil to Canadian pipelines that flow back into the United States through Minnesota, he added.
On Monday, the U.S. Energy Information Administration (EIA) said the shale oil boom in North Dakota, Texas and elsewhere is dramatically reducing the nation’s oil imports. The agency’s most aggressive projection suggests U.S. oil imports could be near zero in 2036.
U.S. crude oil imports had increased steadily from 27 percent in 1985 to about 60 percent in 2005, then began to fall to roughly 40 percent in 2012, the EIA said in its 2014 Annual Energy Outlook.
Looking ahead, the federal agency offered three oil-import projections. In the two less-aggressive scenarios, crude oil imports would drop to 25 to 27 percent of the nation’s demand in 2016, then rise again. The agency’s most aggressive domestic production scenario shows U.S. imports continuing to decline through 2040.
David Shaffer • 612-673-7090 Twitter: @ShafferStrib