BISMARCK — North Dakota officials plan to spend $33 million from the state’s federal coronavirus response allotment on a project that would keep several hundred skilled oilfield workers on the job.
The money will be used to plug an estimated 400 to 550 wells in a project that could keep 500 Oil Patch workers on the job for six months, Lynn Helms, director of the North Dakota Department of Mineral Resources, said Friday, May 15. “Great jobs program,” he said.
Once the economy recovers and the petroleum industry restart happens, labor availability will be a “serious issue,” so maintaining that trained workforce is a priority of a multi-agency task force that is planning to help the Oil Patch bounce back, Helms said.
North Dakota’s oil production likely has tumbled below the milestone threshold of 1 million barrels per day as operators have quickly halted pumping because oil prices have fallen below the cost of production.
As of March, before the collapse in prices from the coronavirus crisis and a price war struck, North Dakota was producing a daily average of 1.43 million barrels per day, Helms said.
But that level has plunged, as more than 7,000 of North Dakota’s 16,263 wells have been idled, leaving officials “pretty solidly convinced” the Oil Patch now is producing about 950,000 barrels daily, he said.
“Things didn’t really begin to unravel until March 9,” when talks by Russia and Saudi Arabia to limit production fizzled, sparking a price war that drove oil production higher, further depressing prices, Helms said.
Drilling in the Oil Patch has fallen by almost 80% and Helms expects the number of drilling crews likely will fall below 10 rigs, down from 60 a year ago.
“That’s not a pretty picture at all,” Helms said. Half of the drilling now occurring is on the Fort Berthold Indian Reservation — a sign, he said, that operators are retreating to the “best part of the core” of the Bakken Formation, where the most productive wells are found.
The number of active drilling rigs is the lowest in North Dakota in years. “We’ve not been there since the Bakken play began” in 2006, Helms said.
In March, the most figures available, which Helms released Friday, natural gas production crept up 0.5%, another indication of the rapid shutdown in the Oil Patch.
Natural gas producers fell just shy of reaching the state’s flaring reduction goal, with 87% of gas being captured. The goal of capturing at least 88% of natural gas will be met soon and possibly happened in April, he said.
In one bright spot in an otherwise grim monthly report of Oil Patch activity, Helms said that state inspectors have reported that crews are beginning to bring a few wells back online. “So we may have seen the bottom of this thing,” he said.
A forecast by the Energy Information Agency indicates oil prices aren’t likely to recover until the fourth quarter this year or first quarter next year.
Once prices rebound, the resurrection of the Oil Patch likely will be gradual, taking from six to 12 months to start, and will be hampered if the turnaround comes in the midst of winter, when conditions are difficult and it will be harder to entice workers to return.
“I think it’s going to be a rather slow process to get production back online,” Helms said.
Fortunately, Helms said, oil producers want to stay in the Oil Patch, which bodes well for a recovery.
“I have not talked to a single company that is considering liquidating its Bakken position,” he said. “They love the resource and they like working in North Dakota, so they’ll stay if they can.”