Like Mark Twain, the rumors of the death of the Bakken oil revolution are greatly exaggerated. The Atlantic is once again claiming the North Dakota oil “boom” has gone bust. I say ‘once again’ because The Atlantic ran a piece February 12, 2013 stating that the “boom” was over. Doom and gloom sells, truth is optional.
Yes, $100/bbl oil is long gone, yes flaring restrictions and oil conditioning requirements add to the cost of doing business. But, the E & P companies that pioneered and perfected horizontal drilling are looking ahead.
I rarely use the terms “boom” and “bust” because I do not think they are helpful to explain what is actually happening here in North Dakota. Lower oil prices certainly impacted the oil & gas industry here, but a transition to more manageable resource development was already underway.
When the oil companies successfully used horizontal drilling in the Bakken it did set off a race to lease mineral acres and drill wells to hold those leases. Some term this period a “boom” because of pace of drilling activity. By 2014 most mineral acres in North Dakota were under lease and those leases are held by production. Achieving that the oil companies can slow down and drill additional wells based on economics, logistics and common sense.
It Is Different This Time
With North Dakota’s tight oil play we know exactly where the oil is; there is no hunting and guessing – it is just mining. To fully develop the Bakken and Three Forks formations it will take a total of 46,000 wells. To date just under 10,000 wells have been drilled. 22% down and 78% to go!
These wells will be drilled. The price of oil will determine the pace. When we had 200 rigs drilling in North Dakota we added about 2,400 wells per year. At that pace it would take 15 years to drill all the wells necessary to develop the resource. Today, at $60 oil we will drill and complete under 1,000 wells/year and at that pace we will be drilling wells for another 36 years! And the average Bakken well will produce oil for 30 years. We will be here awhile.
Some may call that a “bust”, I call it opportunity and a blessing.
I was born in Williston, ND which is the center of North Dakota’s oil & gas industry. I have family and business interests in western North Dakota and spend a lot of time in the area.
Is the pace of things slower? Yes.
Will things pick up again? Yes.
Have they slowed the drilling? Yes.
Will they return? Yes
Is it all gloom and doom? NO.
Last month Job Service ND listed 25, 000 jobs open in western ND. These are not the same jobs that were open the last few years, but jobs just the same.
The North Dakota Legislature appropriated over a Billion dollars for infrastructure in western North Dakota. The slowdown in drilling activity means jobs are available in road construction, public infrastructure, school construction.
Pipelines and upgrading the electrical grid are also priorities and teachers are in demand in area schools.
North Dakota is home to the first greenfield oil refinery on 40 years in the USA. There is a petrochemical plant going up, only the 2nd in US, we have 20 Natural gas processing plants built in around the last 5 years. All these facilities are employing hundreds/thousands of people who were not working here 7-10 years ago. Permanent, long-term, jobs. Not to mention the secondary jobs that these bring.
If you focus only on the number of rigs or the drop in oil drilling activity you miss the bigger picture.
The housing market is finally balancing out. The demand was so high that prices were out of control. Now they are leveling out. Family homes are being built at a more reasonable cost and people are going to be able to settle their families into the communities. Parks and Recreation are catching up with leisure areas for people.
Restaurants, shops, convenience stores, grocery stores, service centers are finally able to put stock on the shelves and manage inventory and staff. The days when it was so busy and such a lack of workers that stores were just setting pallets of goods in the aisles are over; and that is a good thing. Quality of life is improving.
The Bakken Laboratory Is Alive and Well
It is not a “bust” out here – we are just talking about pace & time. We are not drinking from the fire hose in western North Dakota anymore, but our energy pioneers are constantly learning and refining horizontal drilling and fracking techniques to become more efficient.
In another post I will go into greater detail about the exiting advancements the E & P companies are making. The advancements point to a very bright future for North Dakota and the people who live and work here.