North Dakota energy drillers may leave oil in ground longer, wait for prices to rise

North Dakota energy companies granted an extra year to bring wells online

north dakota energy
North Dakota energy companies are being allowed to bank oil in the ground for up to two years.  ConocoPhillips photo.

BISMARCK, N.D. _ Depressed oil prices have helped build an inventory of about 950 drilled but uncompleted wells in North Dakota. Companies are supposed to bring the wells online within a year but North Dakota officials last week decided to give drillers an extra year, hoping for a rebound in crude prices that would provide the state with a better long-term payoff in tax revenue.

More time

North Dakota’s all-Republican Industrial Commission led Gov. Jack Dalrymple last week allowed well owners to bank oil in the ground for up to two years before bringing wells online through hydraulic fracturing, a process that uses pressurized fluid and grit to break open oil-bearing rock 2 miles underground. Alison Ritter, a North Dakota Department of Mineral Resources spokeswoman, said unless oil prices rebound, the agency expects most of the drilled wells that have not been subjected to fracking to be placed on temporary abandoned status at year’s end.

Oil odds

Even if crude prices remain depressed throughout the extension, it is unlikely well owners will abandon them. For drillers in western North Dakota’s oil patch, dry holes are a rarity. State and industry officials say 99 per cent of drill rigs hit oil and nine out of 10 wells make money. The question becomes how long oil remains stored underground.

Well performance

A typical well drilled in North Dakota’s rich Bakken and Three Forks formations will produce about 624,000 barrels of oil during its 36-year lifespan and will generate more than $10 million in net profit, according to the state Department of Mineral Resources. Over its lifetime, an average Bakken or Three Forks well will pay more than $3.3 million in taxes and about $5.4 million in royalties to its mineral owners. An average Bakken or Three Forks well initially produces about 1,220 barrels of oil daily but drops by two-thirds within the first couple of years. The wells produce an average of 70 barrels a day after five years and drop to less than 20 barrels daily after 25 years, the agency said.

The Canadian Press