North Dakota’s Bakken pumps less oil for first time in decade

11/17/2015

DAN MURTAUGH

HOUSTON (Bloomberg) -- The shale boom in North Dakota has softened to a whisper.

The state’s Bakken oil region produced less oil in September than it did the previous year, the first time that’s happened in more than a decade. Output fell as low oil prices, exacerbated by the region’s remoteness, caused companies to scale back drilling operations and delay completing new wells.

North Dakota’s portion of the Bakken produced 1.11 MMbopd in September, down 1.1% from the same month a year ago, according to state data. Half the oil left the state by costly truck and rail routes, forcing producers to offer steep discounts. Along with an overall decline in crude prices, that’s prompted drillers to idle 67% of the rigs that were in the region last year.

“The production drop was inevitable with the rig decline and the low-price environment,” Carl Larry, head of oil and gas for Frost & Sullivan LP, said by phone. “The cost of rail and trucking hasn’t gone down enough to keep production profitable, so it’s a precarious area to keep production steady or growing.”

The year-over-year decline was the first since August 2004, when the region produced just 1,500 bopd. The drop was set in motion nearly a year ago, when falling oil prices made oil companies curtail spending and idle rigs.

Companies that are drilling wells are waiting longer to complete them with hydraulic fracturing crews. The number of drilled but uncompleted wells, known as the fracklog, rose to 1,091 by the end of September, the first time it exceeded 1,000, according to data from state regulators.

The price drop was felt harder in North Dakota because there’s only pipeline space for a fraction of the state’s output. Pipelines are cheaper than rail or truck transportation, so sellers have to offer discounts to make up for the difference in transportation cost. Oil at the wellhead in the Bakken region sold for $29.74/bbl Friday, compared with $37.40 in West Texas, according to the trading unit of Royal Dutch Shell Plc.

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