Study: North Dakota Crude-Oil Production Could Double by 2019

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Crude-oil production in North Dakota's Bakken and Three Forks formations could double to more than 2 million barrels per day (BBL/d) by 2019, according to a recent study from the engineering and planning firm of Kadrmas, Lee & Jackson (KLJ) (Bismarck, North Dakota) and North Dakota State University (NDSU) (Fargo, North Dakota).

The North Dakota Oil and Gas Industry Impacts Study, commissioned by the North Dakota Legislature, looked at crude-oil projections under several scenarios. It also assessed the impact of rising crude oil production on the state's economy and housing and labor markets. The study also considered enhanced oil recovery (EOR) techniques in the Bakken and Three Forks formations.

North Dakota's crude-oil production reached about 1.2 million BBL/d in August, according to the Oil & Gas Division of the North Dakota Industrial Commission (Bismarck, North Dakota). In calculating future crude-oil production, the KLJ/NDSU study examined the last 18 months of production. Its "medium" scenario concluded production could increase by an average of 18,000 BBL/d each month for the next five years, pushing past the 2 million BBL/d mark by late 2018 or early 2019.

Click the image at right to see a graphic of actual and projected gas and crude-oil production in North Dakota.

The study, released in September, was completed in partnership with North Dakota State University's Agribusiness and Applied Economics Department and the University of North Dakota's Energy and Environmental Research Center. It focused on North Dakota's 19 oil- and gas-producing counties and had a timeframe of 2014-19. It considered trends that may increase, decrease or stabilize crude-oil production in the state.

The study constitutes an economic playbook for the state's elected officials on planning for and managing the effects of increased crude-oil production in North Dakota. The study made several assumptions, including:

• Growing oil demand will be balanced by energy efficiency and increased supply from Canadian oil sands and global shale plays.
• Drilling in North Dakota will remain consistent throughout the study period as long as oil prices remain in the $70 to $100 per barrel range.
• Refining capacity for light, sweet crudes along the Gulf Coast will be filled by production from the Permian Basin and the Eagle Ford shale plays, which will drive Bakken crude exports to refineries on the East and West coasts.
• Natural gas consumption will continue to increase substantially as transportation methods and electrical generation more readily utilize natural gas, and as exports of liquid natural gas (LNG) increase.
• Prohibitions on the export of domestic crude oil may be lifted before 2019, but until crude can be exported, Bakken crude could experience significant pricing pressure and/or discounting compared to West Texas Intermediate (WTI).
• Global demand for crude oil will continue to increase at an annual rate of at least 1 million BBL/d throughout the study period.

"The objective of the study was to provide the North Dakota Legislature with a view into the future of oil development in the state that would assist them in developing appropriate long-term policy," Mike Wamboldt, the project manager at KLJ who helped lead the study, told The Bakken magazine. "They wanted us to address the effect of technological advances, especially in CO2-based enhanced oil recovery (EOR), the maturation of the oilfield's development and the impact of infrastructure and environment."

The North Dakota Oil and Gas Industry Impacts Study paid particular attention to EOR's use of carbon dioxide (CO2). The study's authors said their work "proved there is significant opportunity in North Dakota to produce additional oil from well-established conventional oil fields through CO2 EOR." It identified a number of conventional oil fields that were more likely to convert from water-flood EOR to CO2 EOR before 2019. In total, the study identified 86 conventional oil fields where CO2 EOR techniques could increase oil production by between 280 million and 631 million barrels of oil. That level of enhanced production would require between 47 million metric tonnes of CO2 to 283 million metric tonnes of CO2.

Commenting on the potential for CO2 EOR, the study said: "The primary challenges in the near term are all the acquisitions of sufficient CO2 supplies and a focus by operators on this target and away from the attractiveness of the Bakken petroleum system. There is strong potential that, within the (2014-19) timeframe ... the Bakken petroleum system may develop into a CO2 EOR target, which would have a large effect on these projections and would be expected to be a strong driver of CO2 EOR in North Dakota."

The KLJ study showed some producers were relatively immune to the impact of declining global crude-oil prices because they were profitable, as long as prices stayed above $35 per barrel. Some higher-cost producers have been hurt by the recent price declines, though exactly who is being hurt is still coming into focus.

"The projected doubling of Bakken crude-oil production heightens the need to end the prohibition on exports of domestic crude oil," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "A lot of Bakken crude is being moved by rail to the East and West coasts, but because exporting that crude is not an option, buyers have the upper hand and producers are getting lower prices for their product. Removing that 1970s-era prohibition, as well as the Jones Act requirement that all waterborne cargo in the U.S. be transported on U.S.-flagged vessels, would improve the efficiency of the domestic oil business today."

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