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 production 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, when he addressed the Williston Basin Petroleum Conference in Bismarck, N.D. on May 23.
Helms started out by noting 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,” he said.
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.
He 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, with approximately 1,400 barres per day production.
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.”
There were, as of May 23, 65 active drilling rigs in North Dakota, up five from a week before.
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 bpd by 2021, and 2 million bpd by about 2024, peaking at 2.35 million bpd in 2033. Case 2 starts off slower but has a similar, if lower rise. It forecasts 1.6 million bpd in 2024, and a slower rise to 1.95 million barrels in 2034, but never quite making it to 2 million barrels.
“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.
Natural gas production is on a strong growth curve as well, and the gas:oil ratio has been increasing.
“We need to be building 2,000 to 2,500 miles of pipeline every single year from now to 2025. So there is no time like the present to get your right-of-ways,” he said. Recently, that number has been as low as 700 miles of pipeline per year.
Five gas plants are being built in 2018 and 2019, but until they are built, there will be a lack of infrastructure and pipelines to reach the state’s 88 per cent gas capture goals. Even with those five new plants, there will be a need for another tranche of five gas plants in three to four years. And that pattern will likely require another five plants in the years that follow.
He noted there is currently an open season on the Alliance Pipeline (which runs from Fort St. John, B.C. to Chicago). “Some of that is reserved for North Dakota gas, and that’s going to help us a great deal. There’s the potential to increase the capacity going into Chicago by 400 million SCF per day, and that’s great news for our gas processors.
Even with that, and the Northern Border pipeline, there is no additional capacity for gas export by 2026, so a major project is going to be needed. “We’re going to have to look at some other markets for North Dakota gas. I don’t know what that is. I hope it’s fertilizer. I hope it’s plastic, or a pipeline going somewhere to supply our friends in California or Washington with natural gas.
“This is some of the wettest gas on the face of the earth,” he said of natural gas liquids.
“This is still a five-generation oil play. We’re only halfway through the first generation,” Helms said.
There are four enhanced oil recovery projects that will be tested in the field this summer, he noted.
Finally, the workforce is an important issue. “We peaked out at about 56,000 people working in this industry in 2014. That dropped 20,000 jobs, to 36,000, in 2016. In order to accomplish what is ahead of us, we need to add 6,000 jobs this year, 5,000 next year, 10,000 jobs in 2020, and another 4,000 jobs in 2021, for a total of 63,000 jobs in this oil play by 2020.
“Where are we going to house them? Where are their kids going to go to school? What are they going to do for recreation? We need to be talking to our western communities about how they’re planning for these people coming back, because they’re all coming back, plus another 7,000.”