WILLISTON, N.D. — Uncertainty over oil transportation costs as the Dakota Access Pipeline faces delays may be contributing to decreases in North Dakota oil production, the state’s top oil regulator said Wednesday, Nov. 16.
North Dakota oil production fell about 1 percent in September to 971,658 barrels per day, according to preliminary figures from the Department of Mineral Resources.
Director Lynn Helms estimates that operators will pay $6 to $10 a barrel to transport oil via the Dakota Access Pipeline, which had been projected to be in service at the end of the year, compared with $12 to $25 a barrel for transportation costs without the four-state pipeline.
Helms said uncertainty about transportation costs may cause producers to slow production, though he said it’d be hard to put a number on the amount of impact.
The completion date for Dakota Access is unknown after the U.S. Army Corps of Engineers called for additional analysis before it will grant an easement for the Missouri River crossing north of the Standing Rock Sioux Reservation.
When Donald Trump becomes president, that will likely give operators more confidence that pipeline projects will be approved and they’ll be able to lock in lower transportation costs, Helms said.
“It will reduce the uncertainty a great deal,” he said.
However, Helms predicts that a Trump presidency will keep oil prices lower for longer because Trump talks about policies that would favor increased U.S. oil production, which would lead to increases in supply.
Sixty-one percent of Bakken oil was transported by pipeline in September while 29 percent was transported by rail, said Justin Kringstad, director of the North Dakota Pipeline Authority.
The amount of crude transported by rail was around 300,000 barrels per day, with the East and West coasts each receiving about 45 percent of the shipments.
North Dakota had 38 drilling rigs operating Wednesday, up from 33 a month ago. By comparison, the state had 63 active rigs a year ago and 186 rigs drilling two years ago at this time.
Operators expect to add another 12 drilling rigs in North Dakota over the next year, bringing the rig count to about 50, Helms said. However, oil prices aren’t expected to increase to a level that would prompt significantly more drilling until the end of 2018 or later, he said.
North Dakota producers completed more wells in September, with 71 new wells brought online compared to 63 new wells added in August.
That level of activity is expected to lead to future months of production declines, with production trending toward 900,000 barrels per day by mid-2017, Helms said. The oil production levels are on track with estimates being used for North Dakota’s budget forecasts.
In addition to an upcoming change in presidency, Helms noted there will soon be other changes in other elected positions who play a role in regulating oil and gas in North Dakota.
Governor-elect Doug Burgum will begin leading the North Dakota Industrial Commission when he takes office in mid-December and the makeup of the state Legislature will be slightly different as well, Helms said.
“There are lots of changes in the wind,” Helms said.
In September, the number of wells that have been drilled but are waiting on hydraulic fracturing crews was 861, a decrease of 27 from the previous month.
Natural gas production dropped about 1.7 percent in September to an average of 1.6 billion cubic feet per day, according to the preliminary figures.
Natural gas flaring increased from 11.4 percent to 11.9 percent in September.