North Dakota Upbeat on Production, Though Fed Data Differs

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--State data from North Dakota show a slight decline in crude oil production month-over-month, though a state director expressed optimism about a gradual rebound.

North Dakota is host to the Bakken Shale formation, one of the early darlings of the shale boom. The state set a record of 1.5 million barrels of production per day (BBL/d) in November 2019. Federal data show the Bakken formation averaged 1.26 million BBL/d during the three-month period ending June 30.

State data for July, the last full month for which it has information, show oil production averaged 1.16 million BBL/d, a near-2% decline from June levels. Matt Bohrer, the assistant director for the North Dakota Department of Mineral Resources, suggested a slowdown in upstream activity was to blame, though a rebound is on the horizon.

"Activity is expected to increase slightly, and operators continue to maintain a permit inventory of approximately 12 months," he said.

Mergers and acquisitions could also clear the way for more output from the Bakken formation. U.S. supermajor Chevron Corporation (NYSE:CVX) (San Ramon, California) could make a splash once its $5.3 billion buyout of Hess Corporation (NYSE:HES) (New York, New York) clears regulatory hurdles.

Hess currently runs just more than 10% of all the active rigs in the Bakken. It also produced 212,000 barrels of oil equivalent per day during the second quarter from the basin, a 17% increase year-over-year.

Federal forecasts are not as optimistic as the state's forecasts, however. The Energy Information Administration, the statistical arm of the U.S. Department of Energy, finds Bakken crude oil production should average 1.28 million BBL/d in 2024 and 1.32 million BBL/d in 2025, not too far away from current levels.

North Dakota pegs its revenue forecast at 1 million BBL/d. Hess in June said Bakken production could get cleaner, meanwhile, by using electricity to power its frac crews, avoiding emissions that would otherwise come from diesel generators.

Bakken crude oil production accounts for about 10% of the total output from the seven primary inland shale basins, which is expected to average 11.01 million BBL/d this year and 11.4 million BBL/d in 2025.

A decade ago, inland shale oil production was about half the current levels, though the pace of increase month-over-month was far higher than today. The Permian Basin in Texas and parts of New Mexico is the clear standout, with 6.3 million BBL/d in production during the second quarter.

That production level alone eclipses total output from the Lower 48 states in 2015.

Elsewhere, North Dakota, along with other operators in U.S. shale, is doing more to capture the natural gas that's often associated with crude oil. State data show 94% of the gas associated with the Bakken formation was captured, though flaring levels increased 1.7% from June to July.

State officials, however, have expressed opposition to new rules on flaring from the Bureau of Land Management. Gov. Doug Burgum said that federal regulations are a clear intrusion on state authority within its own borders.

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