NEW YORK, Sept 27 Oil production in North
Dakota, home to the giant Bakken shale formation, may double to
1.6 million barrels a day by mid-2017, a state official said in
remarks shown on video at a meeting on Thursday and received by
Reuters on Friday.
Lynn Helms, director of the state's Mineral Resources
Department, qualified that number with a number of regulatory,
tax and demand risk factors.
At 875,000 bpd, output has already exceeded the department's
forecast of reaching 850,000 bpd by early 2014 and staying at
that level until 2015. But that forecast is conservative, the
department has said before, because it is used in state budgets.
In the video and a presentation, Helms outlined current oil
output and forecasts for each of the 17 counties producing
"This puts us in a mode where those risk factors don't
really come home to roost in North Dakota and we hit mid-2017 at
about 1.5 million to 1.6 million barrels a day. About double
where we are today," he concluded.
He said risks to the forecast include the possibility of new
federal rules governing hydraulic fracturing, or fracking, the
drilling technique used to access the shale oil. Other risks
include potential changes to oil taxes and demand for more of
the light sweet crude that Bakken produces.
Even if regulations and taxes are discouraging and demand
flat, he said, oil production could remain at current levels for
a "long time".
"I don't expect that to happen, but I do expect one or more
of these risk factors to impact our ultimate peak production,"
He said U.S. oil refineries only have an additional 650,000
bpd in capacity to take light sweet crude beyond the amounts
they are processing now.
But that could change as the domestic market gets flooded
with light sweet oil produced not just from Bakken but also the
Permian Basin and Eagle Ford formation in Texas and New Mexico.
"As refiners get a taste for light sweet crude oil, we think
there'll be some switching back to light sweet from heavy sour
but there's going to be some price turbulence involved in all of
that," he said.
In recent years refiners spent billions of dollars refitting
their plants to be able to process more heavy sour crude because
those grades tends to be cheaper and in anticipation of more
supplies from Canadian tar sands via the Keystone XL pipeline.
But in the five years that TransCanada's Keystone
XL pipeline project has been stalled by environmental protests
and pending U.S. government approval, production of light sweet
crude in the United States has soared.
In an indication that it recognizes this trend, the
country's largest independent refiner, Valero Energy Corp
, said this week it would raise the capacity to process
light crude oil at its U.S. Gulf Coast refineries.