Kemp: North Dakota's Steady Production Shows Why Market Rebalancing Is Hard

Kemp: North Dakota's Steady Production Shows Why Market Rebalancing Is Hard
North Dakota's oil production has been flat for more than a year, but it hasn't fallen despite the sharp drop in prices, illustrating the challenges of rebalancing the oil market.

Reuters

John Kemp is a Reuters market analyst. The views expressed are his own.

LONDON, Jan 19 (Reuters) - North Dakota's oil production has been flat for more than a year, but it hasn't fallen despite the sharp drop in prices, illustrating the challenges of rebalancing the oil market.

Output was just under 1.18 million barrels per day (bpd) in November 2015, according to state records published on Friday (http://tmsnrt.rs/1S1OoYD).

Output first hit this level September 2014 and has been essentially unchanged for the last 15 months, the longest and deepest pause in growth since the shale boom began (http://tmsnrt.rs/1S1OoYz).

The drop in oil prices, which have fallen by more than 70 percent since June 2014, has curbed the former growth in output.

If production had continued growing at the pre-June 2014 rate of around 2.3 percent per month it would now be at around 1.63 million bpd (http://tmsnrt.rs/1S1Osro).

The reduction in actual output of around 450,000 bpd compared with the previous trend is a measure of how far lower oil prices have already gone towards rebalancing the market.

But most analysts and forecasters expected the state's crude output to have fallen sharply by now rather than just to have levelled off.

Shale production was supposed to respond much faster to declining prices because it required the drilling of a large number of new wells to offset rapid decline rates from old ones.

Instead, shale output has proved unexpectedly resilient, as producers have found ways to maintain output while slashing drilling and costs.

Drilling expenditure has been switched from risky and expensive activities such as exploring for new fields and delineating the edges of existing ones to the development of well-understood core areas of existing reservoirs.

By standardising drilling operations as much as possible, minimising rig movements, and using only the newest and most powerful rigs, drilling firms have cut the time and cost involved each new well.

Horizontal sections are getting longer and the number of stages being fracked is increasing to squeeze more oil from each new well.

The number of active rigs in the state has fallen to around 50-60, down from around 180-190 before prices began to slide.


12

View Full Article

Copyright 2016 Thomson Reuters. Click for Restrictions.

WHAT DO YOU THINK?

Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE



Most Popular Articles

From the Career Center
Jobs that may interest you
Project Manager
Expertise: Project Management
Location: Marietta, GA
 
Bioremediation Sales
Expertise: Business Development|Sales
Location: Austin, TX
 
United States Houston: Senior Manager, Tax
Expertise: Accounting|Financial Audit
Location: Houston, TX
 
search for more jobs

Brent Crude Oil : $42.7/BBL 1.77%
Light Crude Oil : $41.14/BBL 1.83%
Natural Gas : $2.87/MMBtu 7.49%
Updated in last 24 hours