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North Dakota oil output rises 4% in November to 1.16 million b/d

Highlights

Natural gas output up 2.4% to 3.072 Bcf/d

Rig counts rising; December count was 32

December may show output rise, then drop

North Dakota's oil production jumped almost 49,000 b/d, or 4%, in November 2021 to a total roughly 1.16 million b/d, and natural gas output rose 73,000 Mcf/d, or 2.4%, to 3.072 Bcf/d, as drilling activity continued to increase, the state's Oil and Gas Division said Jan. 14.

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"This is really the month we've been waiting for all year," Lynn Helms, the state's oil and gas division director, said during a monthly press webinar on state production and oil and gas activity. "The last time we saw this type of production increase was when we were first coming out of the pandemic, and we started from much lower numbers. It's been over a year since we had a production increase" over 4%.

The production increases occurred as activity in the state rose after months of stagnation. The October 2021 rig count numbered 29, but increased to 33 in November 2001, and for December 2021 it was 32, state figures show.

Helms said it was "unusual" for North Dakota to see gas production increase at roughly half the rate of oil production.

"What we're observing there is significant work in what we call tier 2 and 3 areas outside the core areas as people are beginning to drill 3-mile laterals and different strategies to start developing that lesser developed area."

December's monthly report may also show "good" production increases, Helms said. "January, February and maybe March will not."

Well freeze-offs

In late December, temperatures in North Dakota plunged, resulting in many well freeze-offs, Helms said, adding gas production has not recovered from the event. To avoid flaring and meet gas capture goals, operators reduced oil production.

During that period, producing areas of the state chiefly in the northwest experienced temperatures of minus 20-30 F coupled with wind chill factors that lowered feel-like temperatures to minus 50-60 F.

"Our gas capture really suffers when we hit temperatures like that," Helms said.

'Nice' output growth by midyear

For 2022, industry surveys indicate E&P capital budgets are going to jump "substantially," coming in about 19% higher than in 2020, he added.

"We anticipate January, February and maybe even March could be difficult with significant drops in production," Helms said. "But as we exit winter, we expect half a dozen more rigs in second quarter, half a dozen more in the third quarter and fourth quarter, and significant growth in the second, third and fourth quarters of this year."

"As we come out of winter and start to look at May, June and July, we should be back to nice production growth numbers," he added.

The number of producing wells in the state hit an all-time high in November 2021 of 17,238, up 74 from the previous month, state figures show. That stemmed from the number of drilled but uncompleted wells, known as DUCs, being brought to production, Helms said.

And in October 2021, 41 DUCs were completed, 60 in November 2021 and a preliminary 81 in December 2021. After being completed, a well is typically placed on production.

Also, operators continue to maintain a permit inventory of about 12 months.

Against that backdrop, oil prices have resumed climbing after dipping in late 2021. On Jan. 14, WTI crude was trading at $82.12/b, against $79.18/b in November 2021 and $81.22/b in October 2021, according to EIA and CME Group price estimates.

North Dakota Light Sweet WTI was trading around $74.25/b, against an average of $72.03/b in November 2021 and $74.35/b in October 2021, according to Flint Hills Resources estimates.

For the week ended Jan. 12, WTI averaged $80.09/b up $3.11, while Bakken Composite averaged $80.40/b, up $3.79 week on week, according to S&P Global Platts estimates.