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Helms predicts oil prices to rise again in foreseeable future

Things might not look optimistic at the moment for oil prices, but North Dakota Department of Mineral Resources Director Lynn Helms argued Tuesday at Dickinson's State of the City luncheon that redemption was likely somewhere in the future.

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North Dakota Department of Mineral Resources Director Lynn Helms talks about oil prices and how they're affecting Dickinson on Tuesday afternoon during the State of the City luncheon at the Ramada Grand Dakota Hotel. (Dustin Monke/The Dickinson Press)

Things might not look optimistic at the moment for oil prices, but North Dakota Department of Mineral Resources Director Lynn Helms argued Tuesday at Dickinson’s State of the City luncheon that redemption was likely somewhere in the future.

Helms said North Dakota Sweet Crude in general is selling for about $25 per barrel, which is a 15 percent discount of benchmark West Texas Intermediate crude oil.

However, the only place where it makes financial sense to drill in the state -- at least for the moment -- is McLean County, he said, as all other oil-producing counties in the state have production break-even points higher than this price.

“At this current price, if it holds through this year, we can’t even maintain 49 rigs,” Helms said, noting how many drilling rigs are currently operating in the state. “We go down to 30 rigs.”

Helms said that, as things stand at the moment, 49 drilling rigs were active in the state, around 800 oil wells were in active, and about 1,000 wells had been drilled but not completed.

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Since last year, 18,000 North Dakota oil industry jobs had been lost.

Helms mentioned how prices were low enough that the Flint Hills Resources refinery in Minnesota briefly posted a North Dakota Sour crude price of minus-$0.50 Friday, which meant that the company would pay half-a-dollar per barrel just to have the crude hauled away.

“That’s insane,” said Helms, adding the price was adjusted back to $1.50 a barrel this week.

Ultimately, Helms argued the oil price lull is temporary. He attributed it to a price war between Saudi Arabia, Iran and Russia, and that it is unsustainable.

The price lull is also based on the Saudi’s failed attempt to wipe out the U.S. shale industry, he said.

“Their financial advisers had told them that if they could lower the price below $70 a barrel, U.S. shale would collapse,” Helms said. “That simply didn’t happen.”

At the price it is now, Helms said Bakken oil production would drop slightly below 1 million barrels a day by the end of 2017.

However, if prices climb between $30 and $40 per barrel, he said North Dakota would be able to sustain its rig count and continue producing more than 1 million barrels a day. If the price increased a little more, he said both of these figures would slightly increase as well. If it increased enough, the state could see as much as 2 million barrels produced each day -- a prediction he had made long before the oil price fallout.

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Helms said such a climb in price seemed like a possibility given that Saudi Arabia has budgeted itself this year based on a $40-per-barrel revenue. He said he heard from Saudi officials that the country plans to slightly restrict its production to drive up the price, which Helms said would balance the world’s supply and demand of the commodity.

He said there is currently a surplus of 100 million barrels of crude sitting idle around the country, which he said would have equated to a “3½-year hangover” if the oil export ban had not been lifted in December.

“With the export ban lifted, this hangover departs within this year,” he said, adding that this leaves the U.S. able to respond to market prices.

Helms, who said he’s been in touch with the state’s Census Bureau, also gave an overview of the changing demographics of North Dakota.

He said the African-American community is expanding at more than double the rate of the overall population, and the Hispanic community is growing almost as fast as it looks to overtake the state’s Native American population by 2020.

Helms also said enough young people have returned to the state that it looks to reach 1 million residents through births alone, or around 250,000 babies, sometime in the future.

“That’s really important for us to incorporate all of that into our thinking as we plan for our community, for its future and for its growth,” he said.

Related Topics: DICKINSON
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