MINOT, N.D. – North Dakota oil production, which is poised to break the 1 million barrels per day benchmark, will peak at 1.2 million to 1.5 million barrels per day over the next five years, limited by winter weather and competition from Texas, a Bismarck engineering firm said this week.
KLJ developed projections of the state’s oil and gas activity through 2019 that the firm will use as baseline assumptions for a study being conducted for a legislative committee.
The findings, which received input from industry and state agencies, include:
— Oil Patch communities should anticipate cyclic population levels, as drilling and hydraulic fracturing operations will be more intense during warm weather months.
— The level of truck traffic will remain high, despite additional pipeline development. As the total number of wells increases, trucks will be required to service and maintain those wells.
— The Bakken will face competition from the Eagle Ford and Permian basins in Texas, which are projected to displace Bakken crude from Gulf Coast refineries by late 2016 or early 2017. That will force more Bakken crude to East Coast and West Coast markets, primarily by rail.
— North Dakota railroads are projected to make improvements within the next five years to accommodate oil trains without interfering with agricultural products.
KLJ CEO Niles Hushka presented the projections to the Legislature’s Interim Energy Development and Transmission Committee this week.
Conservative estimates show it will require 40,000 wells and 20 years to complete drilling activities in the Bakken and Three Forks formations. Some projections put the total well count in the North Dakota Williston Basin as high as 120,000, the study says. North Dakota had 10,100 producing wells in January, including 6,935 Bakken and Three Forks wells.
Hushka said companies are expected to complete an average of 2,100 to 2,300 wells per year over the next five years in North Dakota. The main reason they won’t drill more wells is a limit on how much money they have to spend, he said.
“Companies have other places to invest their money,” Hushka said. “We are in direct competition with the Permian and the Eagle Ford. It’s cheaper to drill in the Eagle Ford and they don’t have winter, which is a significant factor.”
The industry is shifting to what Hushka called “batch drilling” and “batch fracking,” in which multiple wells are drilled at the same location, followed by fracking of those wells in a condensed time period.
That allows the industry to gain efficiencies, but it also has some logistical challenges. For example, Bakken wells require an average of 1 million to 1.5 million gallons of water for fracking. If an operator is fracking 10 wells at one location, it would require 10 million to 15 million gallons of water.
“We have a lot of traffic that’s going to be generated to that pad over a narrow period of time, which affects infrastructure,” Hushka said.
The batch development methods, along with challenges of operating during harsh winters, will mean more development will be concentrated during warm weather months, he said.
The state, which produced 933,128 barrels of oil in January, already is seeing a slowdown in winter months, with 660 wells waiting on fracking crews at the end of January.
“We’re going to see some severe cyclic demands for temporary labor, just like we do in construction today,” Hushka said.
The state is expected to add 13,000 to 15,000 miles of pipeline through 2019, the report says. The new pipelines are expected to have enhanced technology and automation features to detect leaks, Hushka said.
“The good news about automation is it’s catching small problems before they become big problems,” Hushka said.
The firm will use the baseline assumptions to guide a third phase of its study, which will involve forecasting over the next five years and presenting legislators with recommendations. The study, which will cost $125,000, will give legislators an overview of oil and gas impacts that can guide them during the next legislative session.
Sen. Connie Triplett, D-Grand Forks, who had been critical of KLJ during a previous presentation, said this week she’s impressed with what the firm presented. She had advocated for a study that looked beyond five years and asked that the study mention some potential advancements, such as shifts in global markets, that may be significant in the future.
“We need, as legislators, to at least be aware of the longer view, so we don’t panic about the notion that they’re just going to lay their rigs down and drive away,” Triplett said.
Sen. Philip Murphy, D-Portland, questioned the study’s assumption that oil trains will not interfere with agriculture transportation when he hears from ag producers who are at a “panic point” about rail availability.
Hushka said the rail concerns are expected to be addressed within the next five years as railroads complete expansion projects.
“I know that doesn’t help your constituents who want it moved today,” Hushka said.