North Dakota Department of Mineral Resources. 600 East Boulevard Ave. - Dept 405 Bismarck, ND (701) (701)

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1 North Dakota Department of Mineral Resources East Boulevard Ave. - Dept 405 Bismarck, ND (701) (701)

2 Wells 13,004 active 2,106 conventional 10,898 Bakken/Three Forks 1,556 inactive +$40 for 90 days 67 days to go 917 waiting on completion +$50 for 90 days NYMEX April ,988 permitted +$60 for 90 days NYMEX $55 max 13,515 increased density approved 30,980 total 55,000-65,000 estimated ultimate

3 55,000-65,000 wells 15 new wells (gross) Source: Continental Resources

4 1,988 permits approved level

5 In 2011 each rig drilled 8-10 wells per year In 2016 each rig can drill wells per year 2005 level

6 Initial Production & Estimated Ultimate Recovery up 20% Well cost down 30% Operating costs down 35% Total reduction so far 65% Oil Price down 55% Brent $45.85 WTI $44.75 NDSweet $31.50

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8 +1% G1 G2 G3 G4 G5 Reclaim EOR? +++

9 (-)$0.65=(-)2%

10 165 Rigs out of 183 In the core area November 2014

11 Divide (2) Williams (2) Mountrail (4) 26 out of 29 Rigs McKenzie (15) McLean (1) Dunn (5)

12 4Q 2015 May-16 Breakeven Wells $35 ND$/barrel Rigs Dec 2015 NC Billings $ Bot-Ren $95 0 1,033 3 Bow-Slp $ Burke $ Divide $ Dunn $22 5 1, Golden Valley $ McKenzie $ , McLean $ Mountrail $53 4 2, Stark $ Williams $43 2 2, Statewide $ ,

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14 Abdalla Salem El-Badri, OPEC secretary-general Shale oil in the United States, I don t know how we are going to live together. Any increase in price, shale will come immediately and cover any reduction OPEC didn t expect oil prices to drop this much when it decided to keep pumping near flat-out Low oil prices have caused companies to cut too much spending on developing new output, which could plant the seed for a very high price in the future, if there s no supply coming to the market, prices will go up Ali Al-Naimi, Saudi Arabia minister of petroleum and mineral resources This is not the 1980s, each cycle comes with uncharted territory and unwelcome surprises, it will end, when I don t know, but it will,

15 Storage East Coast 18 of 20=90% Cushing 66 of 70=94% Permian 89 of 120=74% Gulf Coast 286 of 395=72% Rockies 27 of 40=68% West Coast 56 of 100=56% Total US 541 of 735=74% Normal 380 of 735=52%

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18 Jobs 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 Williston Area % 0% Billings 0% Bottineau 0% Bowman 25% Burke 45% Divide 10% Dunn 0% Golden Valley 0% McHenry 40% McKenzie 0% McLean 0% Mercer 30% Mountrail 0% Renville 0% Slope 0% Stark 0% Ward 85% Williams 0% Tyler 40% Eastern Montana 5, Year Prod jobs Secondary residents Gathering jobs Fracing jobs Drilling jobs

19 Jobs 120, ,000 80,000 60,000 40,000 20,000 Williston Area % 0% Billings 0% Bottineau 0% Bowman 25% Burke 45% Divide 10% Dunn 0% Golden Valley 0% McHenry 40% McKenzie 0% McLean 0% Mercer 30% Mountrail 0% Renville 0% Slope 0% Stark 0% Ward 85% Williams 0% Tyler 40% Eastern Montana Year Prod jobs Secondary residents Gathering jobs Fracing jobs Drilling jobs

20 Endangered Species 6 endangered 4 threatened 1 proposed 2 candidate 4 potential Federal Reserve Interest rates Strong $ $+1% = oil -2% $-1% = oil +4% Federal Regulation BLM (6) Hydraulic Fracturing Onshore 3, 4, & 5 Venting/Flaring Sage Grouse EPA (5) Chemical Disclosure Waters of US Methane Emissions Waste Rules Lawsuit Clean Power Plan BIA / Tribe ROW rule Tax Agreement TERO Regulations

21 Solving the Flaring Challenge JJ Kringstad - North Dakota Pipeline Authority

22 General Guidelines for Not Completed - Waiver of Wells Policy Goal: The North Dakota Industrial Commission (NDIC) is charged with "fostering,... encouraging, and... promoting the development, production, and utilization of the state's natural resources of oil and gas in the state in such a manner as will prevent waste." The Commission is promulgating this Policy to prevent waste. North Dakota Century Code (NDCC) (1) (l) and North Dakota Administrative Code (NDAC) (1) define what constitutes abandonment of a well and the operator s obligation to plug such a well and reclaim its site. NDAC (2) was drafted to give the operator of an abandoned well sufficient time either to restore production or plug and reclaim the well. This Policy does nothing to change the existing text or application of NDAC (2) to a well which has previously produced oil or gas. NDAC (3) and this policy are drafted to eliminate the waste which would otherwise occur by application of NDAC (2) to horizontal Bakken wells for which completions have been deferred. Not Completed Waiver (NCW) Status may only be given to wells that have been drilled but whose casing has not yet been perforated (i.e. the well is incapable of producing oil or gas because completion operations have not yet been performed). As of 3/31/16 there were 917 Not Completed wells The estimated price point for completion is $50-60 / barrel WTI

23 General Guidelines for Inactive Well - Waiver Policy Goal: The North Dakota Industrial Commission (NDIC) is charged with "fostering,... encouraging, and... promoting the development, production, and utilization of the state's natural resources of oil and gas in the state in such a manner as will prevent waste." The Commission is promulgating this Policy to prevent waste. North Dakota Century Code (NDCC) (1) (l) and North Dakota Administrative Code (NDAC) (1) define what constitutes abandonment of a well and the operator s obligation to plug such a well and reclaim its site. NDAC (3) was drafted to give the operator of an abandoned well sufficient time either to restore production or plug and reclaim the well. Inactive Well Waiver (IAW) Status may only be given to wells that have met the following criteria. 1. Proposed IAW Approval Procedure 1. The operator must submit a Sundry Notice Form 4 intent to request a waiver to plug and reclaim an abandoned well pursuant to NDAC Part (3). The request must include: a. Documentation of why the well is currently in an inactive or abandoned status. b. A statement that the well is uneconomic to produce at current crude oil price. c. A statement that wellhead equipment complies with NDAC and with regard to subsurface pressure control and well and lease equipment is in good working order. d. The current casing and tubing pressure. e. If the well was in abandoned status prior to January 1, 2016 (last production prior to October 2014), document why the well was not returned to production at that time. As of 3/31/16 there were 1,556 inactive wells The estimated price point for return to production is >$40-45 per barrel WTI

24 Spills versus wells Good Spills versus volume OK Uncontained spills need work = proposed rules 25% pipeline 16% equipment failure 10% fire 9% root cause not reported 8% human error 7% valve-piping leak 6% treater leak 5% stuffing box 5% treater pop off 4% tank overflow 2% tank leak 1% blow out 1% vessel leak ½% pump leak ½% truck overflow

25 26 th St 16 th Ave W 2 nd Ave W 13 th Ave E 11 th St BNSF

26 City ,680,000 BO About 2,000 BO/lot

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