UPDATE 2-North Dakota oil production hits record high

Fri Sep 13, 2013 4:19pm EDT

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By Selam Gebrekidan
    NEW YORK, Sept 13 (Reuters) - Oil production in North Dakota
hit a new record high in July as oil companies brought more
wells online once summer rains stopped, the state regulator
said.
    Output in July jumped by 55,000 barrels per day from the
month before, to just below 875,000 bpd, monthly data issued by
the North Dakota Industrial Commission's Oil and Gas Division
showed on Friday.
    Most of the new production came from the Bakken and Three
Forks shale formations where drillers are using horizontal
drilling and hydraulic fracturing (fracking) technologies to tap
the state's massive oil resources.
    Companies produced slightly more than 810,000 bpd of oil
from the Bakken shale in July.
    Output growth picks up pace every summer in North Dakota
when warm weather allows for more drilling and completion work.
    "A lot of (fracking) crews sat idle in May and June because
it was wet and they couldn't get frack sand to the wells," said
Lynn Helms, director of the commission's oil and gas division.
    But more than a hundred wells were completed - fracked and
connected to gathering lines - once the weather cleared at the
end of June, he said.
    Still, nearly 460 wells were awaiting completion in July as
companies continue to use a more efficient drilling method
called pad drilling that is adding wells faster than they can be
fracked.
    Output will continue to march higher in the coming months
when these new wells are brought online, Helms noted.
    Some 206 new wells were drilled in July, all of which
targeted the Bakken and Three Forks formations, according to the
data.
    
    FLARING STILL A PROBLEM
    The state is struggling to control natural gas flaring as
producers continue to burn off or vent the gas they find in oil
wells in the absence of pipelines to bring the hydrocarbons to
market.
    The commission has announced its plans to cut the length of
time companies are allowed to flare from a well and the number
of wells that do so, although it is yet to outline clear policy
measures it can implement without curtailing oil output.
    North Dakota produced a record 9.7 billion cubic feet a day
of natural gas in July but flared a quarter of that volume, the
regulator's reports show.
    More gas was flared in July than the previous month after an
older natural gas-processing plant, operated by Oneok Inc
, ran into mechanical problems, Helms said.
    Flaring is a controversial process that critics say brings
lasting damage to the environment.
    
    RAIL BLITZ
    About 67 percent of the oil produced in July reached its
destination markets in rail tanks, the North Dakota pipeline
authority said.
    Most of the rail shipments reach refineries on the East and
West coasts, including plants in northeast Canada.
    But rail shipments of crude oil have gathered federal
regulators' scrutiny in North Dakota after audits revealed that
some cargoes were not properly labeled. 
    The runaway train that was carrying Bakken crude when it
exploded in Quebec in July was carrying oil that was not
properly labeled, Canadian authorities said this
week. 
    These concerns have led to random inspections that started
in August and were dubbed "Bakken Blitz" by the federal agencies
heading the operation.
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