ND oil production drops as operators 'tap the brakes'

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BISMARCK — North Dakota oil production dropped nearly 2 percent in June as producers scaled back activity, primarily to keep natural gas flaring from exceeding state limits, the state's top oil regulator said Thursday, Aug. 16.

The state produced an average of nearly 1.23 million barrels of oil per day, a drop of more than 20,000 barrels per day from the May record of nearly 1.25 million barrels.

"Industry's tapping the brakes a little bit," said Lynn Helms, director of the Department of Mineral Resources.

Operators flared 388 million cubic feet of natural gas per day in June, falling short of the gas capture target set by the North Dakota Industrial Commission for the second month in a row.

Helms said operators voluntarily restricted oil production in June in order to stay in compliance with the gas capture policy, which calls for companies to capture 85 percent of Bakken natural gas.

Natural gas production decreased about 1 percent in June to an average of 2.3 billion cubic feet per day, according to the preliminary figures.

Operators captured 83 percent of natural gas statewide in June and 84 percent of Bakken natural gas, Helms said.

It continues to be rare for regulators to restrict oil production for companies that fall below the gas capture target. Eleven operators captured less than 85 percent of Bakken natural gas in April and nine fell below the target in May, according to the Department of Mineral Resources. No oil production restrictions were imposed for April or May, said department spokeswoman Katie Haarsager. June flaring figures are still being analyzed.

The gas capture target is set to increase to 88 percent in November.

Helms said operators are concerned about reaching that goal, but they'll get some relief with two gas plants scheduled to come online later this year. Currently, natural gas production exceeds processing capacity, but six new plants or expansion projects are under construction or in development.

A significant oil production decrease occurred on the Fort Berthold Reservation, where gas capture is the most challenging due to delays in securing federal right-of-way approval for pipeline projects, Helms said.

Rainy weather in June also slowed oil production with storms that prompted top oil-producing counties to close gravel roads to heavy truck traffic to prevent damage, Helms said. The weather forced one major operator to shut down 20,000 barrels a day of production for three days, Helms said.

Fifty-eight drilling rigs were operating Thursday, down from 66 last month.

Helms also attributed the drop to workforce shortages with hydraulic fracturing crews.

North Dakota set one new record in June, with 14,778 producing oil and gas wells, up 15 from a month earlier.

Although gas capture will continue to limit oil growth, Helms said he anticipates an overall upward trend this year.

"We really expect some additional production records to be set before the end of the year," he said.

About 70 percent of oil left North Dakota by pipeline in June, compared with 19 percent by rail, said Justin Kringstad, director of the North Dakota Pipeline Authority.

North Dakota saw an uptick in rail transportation of crude oil in June, with 250,000 to 280,000 barrels per day traveling by rail. Kringstad attributed the increase to market conditions that made it attractive for shippers to send oil to coastal markets.