(Adds comments on forecasts, rail transport, flaring)
By Sabina Zawadzki
June 14 Oil production in North Dakota, home to
much of the Bakken shale formation, will surge during the summer
months and could exceed the state's forecast of 850,000 barrels
per day (bpd) by the end of the year, state regulators said on
North Dakota's Department of Mineral Resources said output
reached yet another record in April, rising 1.3 percent, or just
over 10,000 bpd, to 793,000 bpd despite weather conditions which
included a heavy snowstorm and the coldest April on record.
"We're tracking pretty well with the forecast considering
the weather," Lynn Helms, director of the department, told a
Webinar after the April figures were released.
"We expect a big surge in production in the summer months. I
think, based on the number of wells waiting to be fracked and
the number of wells being drilled, we'll probably beat the
forecast," he said.
The shale revolution has elevated North Dakota to be the
most prolific oil producing state after Texas and contributed to
a U.S. revival in output. Its production exceeds that of
including Britain and OPEC member Ecuador.
Helms said production should exceed 800,000 bpd within the
"next month or so" although he noted weather continued to blight
development. May was the wettest month on record and summer
conditions in the state this year may last shorter than usual.
The number of wells completed -- fractured with chemicals
and water and made ready to pump oil -- fell in April by 28
wells to 119 wells. Nevertheless that was above a threshold of
90 new wells per month needed to ensure production growth.
There were 490 wells that had been drilled but not completed
as "drilling rigs continue to outpace frac crews and the ability
to get wells on production", Helms said.
Because shale oil projects are characterized by rapidly
falling production, new wells need to be drilled and completed
at fast rates to maintain or increase output. The total number
of producing wells rose to a record 8,758.
CRUDE BY RAIL
The production surge from Bakken, which straddles the
U.S.-Canadian border, took the energy services and transport
industry by surprise leading to a lag in the right
infrastructure to transport crude to the Gulf and East Coast
This fact, coupled with a wide spread between Brent and U.S.
benchmark West Texas Intermediate (WTI) crude prices
CL-LCO1=R, led to the crude being transported by rail, a quick
and flexible solution even though it is more expensive than
Justin Kringstad, of the North Dakota Pipeline Authority,
said 75 percent of Bakken crude is transported by rail with only
17 percent shipped by pipeline. Around 7 percent goes to Tesoro
Corp's 60,000 bpd Mandan refinery in the state.
Kringstad did not give comparable figures but said the trend
could slow as the Brent-WTI spread narrows, which it has done in
recent months as increased pipeline capacity to the Gulf Coast
begins to reconnect the U.S. benchmark to the wider market.
The first sign of crude-by-rail cooling appeared on Thursday
when data from the Association of American Railroads showed the
number of railcars loaded with crude or refined fuel per week
had dropped by about 5 percent in May.
Kringstad also said only 72 percent of associated gas that
is unintentionally produced together with the oil had been
captured and sold, far below the state's historical average of
95 percent. The rest had been flared.
He expected flaring to fall as wells get connected to new
gas gathering stations and more pipelines are built. He noted a
$650-700 million project announced by WBI Energy Inc in May that
upon completion by the end of 2016 would carry Bakken gas to
eastern North Dakota and neighboring Minnesota.
(Reporting by Jonathan Leff and Sabina Zawadzki; Editing by
Steve Orlofsky and Marguerita Choy)