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Oil output nearing Alaska's: ND closer to becoming second-largest producer

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Oil output nearing Alaska's: ND closer to becoming second-largest producer
Dickinson North Dakota 1815 1st Street West 58602

GRAND FORKS -- North Dakota has hit a singular mark on its rapid ascent toward being the second-largest crude oil-producing state behind Texas.

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State regulators announced Tuesday that daily crude oil production reached 510,000 barrels a day in November, the latest official statistics available.

"This is big news for the state and the country," said Lynn Helms, the state's chief regulator, in a news release Tuesday. "A half-million barrels a day represents about 10 percent of U.S. production. That's enough oil to displace imports from Iraq or Colombia."

What's singular is that North Dakota's production is rapidly growing while other states -- as well as federal off-shore production -- are decreasing their production or remaining static.

"Oil production in the state has increased anywhere from 8,000 to 40,000 barrels a day, every month since June," Helms, who is director of the Mineral Resources for the state Industrial Commission, said in the release.

"It's been wonderful," said Harold Hamm, chairman and CEO of Enid, Okla.-based Continental Resources, the biggest player in the state's Oil Patch. "I think we will overtake California within the next quarter, perhaps in the first quarter of this year, and Alaska soon after that. Their production is falling and ours is going up."

Speeding up

North Dakota's crude output has quadrupled in four years; it produced 130,768 barrels per day in November 2007. Annual production of crude has gone from 80 million in 2009 to 110 million in 2010 to an expected total close to 150 million barrels in 2012.

"It's really an amazing number and we have done it with just 6,000 wells," said Ron Ness, executive director of the North Dakota Petroleum Council, a trade group whose membership of oil-related companies has nearly tripled in about four years to 330, one measure of the boom. "California has 60,000 (wells)."

North Dakota has gone from producing 1 percent of the nation's crude oil in 2007 to nearly 10 percent, Ness said. "That's more American-made energy, which creates jobs, wealth, opportunities and increases our nation's energy security. North Dakota is leading the way."

U.S. crude oil production is about 5.5 million barrels a day, according to federal statistics.

The mild winter in North Dakota has meant less of a slow-down for cold and snow, too, which normally happens in December and January, Hamm said from his Oklahoma office. He gets up to North Dakota nearly every week, because two-thirds of his company's capital investment is in Williston Basin's Bakken Formation, he said.

The basin includes several counties in western North Dakota and a small part of eastern Montana, with Williston forming the hub.

Overtaking

In the meantime, California's daily output has decreased by nearly half since 1985 and is at about 570,000 barrels a day, Helms said.

Alaska's crude production is down by 30 percent since 2005, to not much more than 570,000 barrels a day, through November, according to state officials there.

That puts North Dakota within a few months of surpassing California and Alaska in crude output, based on recent trends.

North Dakota passed Louisiana to become the fourth-largest producing state in 2009. Louisiana's daily output has gone from 200,000 barrels a day in 2008 to 185,000 barrels in 2010.

Federal off-shore crude oil production also has dwindled in recent years, down by two-thirds since 2005 to 116,000 barrels a day, according to figures from the U.S. Department of Energy.

Texas has shown a slight increase the past six years as oil prices have soared and produces about 1.1 million barrels a day.

Slowing down

The pace of oil development in the Williston Basin has been so rapid that oil companies have had to slow down a little in recent months.

The boom has had to pause a little to let infrastructure catch up, Hamm said.

Lack of housing for new employees, the shortage of crews to do the hydraulic fracturing needed on each new Bakken well, the need for more gas plants to handle the natural gas that accompanies crude oil production all have forced everyone to take a bit of a breather, Hamm said. "We have slowed on purpose," he said. "And that's a good thing."

Homeless shelters in Williston are overflowing with new people looking for work who can't find a place to live. The city's population has ballooned from 13,000 three years ago to an estimated 22,000 or more now, city leaders say. Three new motels were built there last year and six more are planned this year and room occupancy rate is about 95 percent.

Williston now out-does Fargo, which has five times the population, in sales taxes.

Rents have tripled, in some cases, in just the past few months, to $2,000 or more for a one-bedroom apartment in Williston.

"We have seen that rig count (in North Dakota) kind of flatten out, at about 200 in the last six months or so," said Ron Ness. "Operational costs have been insane. It's supply and demand."

There were exactly 200 rigs drilling Tuesday, in fact, according to Helms' office. The record of 204 was set last fall.

Mature stage

There are a few signs that development is moving into a more mature stage, Ness said, as pipelines get built, natural gas plants added, so that the new wells can be efficiently produced.

It takes an average of about 25 days to drill a new well, Hamm said. "We had some go in as quickly as 16 days and some take 30 days," he said.

But Helms has said that a key need is for another 10 crews or so added to the 30 crews already working in the Williston Basin to do the "fracking."

After a well is drilled and the rig moved off the hole, a fracking crew injects a mix of water, sand and chemicals down along the 10,000-foot lateral, which is 10,000 feet below the surface, to break up the tight shale formation so the oil can be obtained.

Honing the fracking technique to the Williston Basin's shale formations was the key breakthrough to making the Bakken produce.

Now the shortage of fracking crews is delaying production on drilled wells a month or more, Helms told The Associated Press on Tuesday.

Strong demand

World prices have remained relatively high the past year, not far below $100 a barrel, making the relatively expensive unconventional Bakken production worthwhile.

Despite Iran's threats to close off the narrow Strait of Hormuz in the Persian Gulf, through which 20 percent of the world's oil moves every day, since the Libyan crisis nothing has upset global oil prices much, Hamm said.

"World oil demand remains strong, it's up to about 89 million barrels a day, driven by the Indian continent and (other) fast developing countries," Hamm said. "And the U.S. economy has improved a little bit."

Hamm has been more bullish on the Bakken than most, and has said he thinks the possible reachable oil might be double the 11 billion barrels that North Dakota officials said in recent months should be obtainable with known technology.

"Our estimate was that (the state's) production would be over a million barrels a day by 2015," Hamm said Tuesday. "And we may be running a little ahead of that."

Lee is a reporter for the Grand Forks Herald, which is owned by Forum Communications Co.

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