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Analysis: Harsh Dakota winters bring new risk to Bakken oil markets, peak 475,000 bpd in October
Reuters via Calgary Herald ^ | November 15, 2011 | Slam Gebrekidan

Posted on 11/16/2011 7:16:34 AM PST by thackney

The cold autumn wind whipping North Dakota’s Badlands carries a new seasonal risk to the oil markets: an abrupt slowdown in the breakneck expansion of the Bakken oil shale bonanza.

Fierce winters — where temperatures drop as low as minus 40 degrees Fahrenheit (-40 degree Celsius) and snow piles up to 107 inches (2.7 meters) — have in recent years impeded work on oil wells and slowed traffic across the white prairie, halting a relentless oil production boom that has upended the market.

The volumes are small but important: if fewer barrels of new oil are added to the market, the price pressure on Midwest crude oil will come off. At least during the winter, U.S. crude may rebound from its record discount against global benchmark Brent, which was brought on by the absence of pipelines that pump the crude to Gulf Coast refineries.

And while seasonality is nothing new to oil traders, its emergence in North Dakota is another sign of how the country’s rapidly emerging “tight oil” bounty is introducing major changes to the most cash-flush commodity market, even as it reverses what had been an inexorable decline in onshore output.

The National Weather Service has predicted another unusually harsh winter this year. Oil production in North Dakota is expected to reach a record high of 475,000 bpd in October, then level off at lower rates for six months, says Lynn Helms, director of the state department of Mineral Resources, which regulates oil producers.

“Winter is going to flatten the curve — instead of growing at 20,000 barrels-per-day every month, production will level off or rise very slowly in the coming months,” he told Reuters. Output has doubled in just three years.

Drillers say winter weather forces them to reduce work by 10 to 15 per cent on hydraulic fracturing, the controversial technology that has allowed companies to tap into some 3.65 billion barrels of reserves in the unconventional shale play.

Transport firms say fierce snowstorms and high winds along open roads also slow or halt traffic, preventing trucks from delivering equipment and rigs to drill sites or hauling out crude oil away to refineries and rail hubs.

Operators say they’re getting smarter each year, finding new ways to minimize the disruption to wintertime operations.

Meanwhile, the impact for markets grows. North Dakota’s oil output, already poised to overtake California as the nation’s third largest oil producing state, reached above 464,000 bpd in September, which met 2.4 per cent of U.S. consumption.

BITTER WINTER, WET SPRING

The oil market is accustomed to seasonal shifts in supply and demand. Oil demand dips in the autumn and spring, North Sea oil production falls during summer maintenance and gasoline consumption soars during the U.S. summer. One oilfield in Russia’s far east used to shut completely during winter.

Last year, when North Dakota was gripped by one of the coldest and wettest Decembers on record, some 13,000 barrels-per-day (bpd) of production was forced off-line and leaving over 1 million barrels of oil uncollected in wells.

In February, producers were forced to idle more than 800 wells, the largest such number in nine years. More than 50 rigs have been added to the prairie’s oilfields since last year.

The bitter winter lasted later than usual, with temperatures below freezing in March. But the problems did not end when the snow thawed in April. Floods inundated the Missouri River and cut off traffic throughout the state, dragging down production by 2.5 per cent for the month.

Over the past five years, North Dakota’s crude oil output dipped an average of 4,900 bpd in December and January. This compares with a five-year average increase of 7,726 bpd in June.

The largest drops were recorded in the 2008-2009 winter, when blizzards put a strain on production as did low prices when U.S. crude fell below $40 a barrel. The state’s output fell 7.25 per cent that January.

Graphic: http://link.reuters.com/qyb94s

THE CRUELEST MONTHS?

When the weather unleashes its fury, companies are forced to idle wells and leave barrels of oil stranded, according to Ron Ness, director of the North Dakota Petroleum Council, which represents state producers.

“Everything just takes longer and costs more,” Ness added.

Continental Resources, one of the largest producers in the Bakken prospect both in North Dakota and Montana, says winter power outages and spring rains slowed well completions — preparations to pump out oil — and hampered the free movement of rigs in the past few years.

Texas-based oilfield operator Halliburton says it completes 10 to 15 per cent fewer fracking jobs in the height of winter in North Dakota since operations take more time. The company says it takes more time to clear out snow or frack wells, a process that involves pumping chemical-laced water and sand into wells to free trapped oil.

“In some places it could take trucks a week to get back out to wells,” said Tom Blazer, vice-president of the North Dakota Motor Carriers Association, adding last winter was among the worst for truckers.

Spring thaw can be a disaster after a snowy winter in the Great Plains. Road restrictions were put in place last year after snow melted in May and led to a 113-year record flood along the Missouri River and its tributaries.

In June, five drilling rigs were stuck and out of use, and drillers shut in 45 wells and 500 more awaited fracking services in vain. The floods briefly shut 50,000 bpd of rail transportation and access was cut off to a terminal in Minot, North Dakota.

Output then jumped in the summer, by up to 40,000 bpd between June and July as companies sped up fracking work.

Every year, operators take some measures to avert severe production losses. They schedule heavier drilling work in the fall, undertake major winterization projects and preheat fracking fluids in winter. Continental Resources built pipelines and storage tanks for crude and fracking fluids to prepare for the winter ahead.

Such arrangements sent North Dakota’s rig count to a record high of nearly 200 in October, according to state regulators.

“We don’t know what weather conditions will bring but operators always make adjustments based on what they learned last session. So I expect impacts to be less than last year,” Ness with the state Petroleum Council says.


TOPICS: News/Current Events; US: North Dakota
KEYWORDS: energy; oil

1 posted on 11/16/2011 7:16:34 AM PST by thackney
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To: thackney

Drilling engineers should be prepared for extreme cold. The climate of North Dakota was not unknown. We’ve been drilling and pumping oil in the frigid wilderness of northern Alaska and Prudhoe Bay for 40 years without major issues.


2 posted on 11/16/2011 7:18:30 AM PST by St. Louis Conservative
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To: thackney
it reverses what had been an inexorable decline

Somebody 'splain to this writer what "inexorable" means.

3 posted on 11/16/2011 7:21:13 AM PST by Izzy Dunne (Hello, I'm a TAGLINE virus. Please help me spread by copying me into YOUR tag line.)
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To: St. Louis Conservative

Agreed, I’ve worked on the Alaskan North Slope.


4 posted on 11/16/2011 7:21:17 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

thanks for your posts, as always


5 posted on 11/16/2011 7:22:53 AM PST by ConservativeDude
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6 posted on 11/16/2011 7:24:28 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

shouldn’t NPR make documentary about the positive effect of global warming here?


7 posted on 11/16/2011 7:24:53 AM PST by heiss (heartless)
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To: Izzy Dunne
Slam Gebrekidan....must be a pen name. lol
8 posted on 11/16/2011 7:24:55 AM PST by verity (The Obama Administration is a Criminal Enterprise.)
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To: thackney
Back when I lived in North Dakota, we always had a saying that ‘40 below was occasionally necessary to keep the riffraff out.’
9 posted on 11/16/2011 7:25:04 AM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: St. Louis Conservative

Ditto - I’m sure winter has some impact, but good grief, the author seems to have forgotten Alaska existed.


10 posted on 11/16/2011 7:25:46 AM PST by lacrew (Mr. Soetoro, we regret to inform you that your race card is over the credit limit.)
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To: thackney

I recently located a really good job for my brother in law in the the oil industry as a welder in North Dakota. The pay was great but, being as how he lives in Florida, he decided to wait on the job until next Spring. Going from balmy Florida to the arctic blasts of North Dakota can be brutal.


11 posted on 11/16/2011 7:26:40 AM PST by PJ-Comix (Free Depends for OWS Protesters)
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To: thackney

KOG is one of the companies doing business there.


12 posted on 11/16/2011 7:27:13 AM PST by US_MilitaryRules (Unnngh! To many PDS people!)
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To: thackney

Not sure this is much of a story. As has been said we pump oil in Alaska, and the Russians also pump oil in Siberia.


13 posted on 11/16/2011 7:28:32 AM PST by Will88
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To: PJ-Comix

He may want to look at South Texas for the winter work.

Eagle Ford Shale is doing the same type of work and struggling to find enough people.


14 posted on 11/16/2011 7:28:35 AM PST by thackney (life is fragile, handle with prayer)
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15 posted on 11/16/2011 7:33:59 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

There’s a series running on the Science Channel called “Cold Diggers”, it was on yesterday again. They follow MGM Energy and Nabors Drilling as they drill in the Yukon, well above the Artic Circle and Northern Alberta. It’s a 4 or 5 part series.

If you can drill there as they say. ND ain’t sh%t.


16 posted on 11/16/2011 7:34:08 AM PST by Recon Dad ("The most important rule in a gunfight is: Always win and cheat if necessary.")
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To: lacrew
I’m sure winter has some impact, but good grief, the author seems to have forgotten Alaska existed.

I don't think they have to use fracking in Alaska.

With oil shale the water/acetic acid/sand/glass beads etc have to be trucked in to the well head....and when the well is put in production a lot of it comes back out, which is then trucked back to re-cycling facility.

17 posted on 11/16/2011 7:35:39 AM PST by spokeshave (Cain....100% American, 100% Black and 100% for the Constitution...999 an added benefit.)
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To: thackney

Awesome map!


18 posted on 11/16/2011 7:36:22 AM PST by Recon Dad ("The most important rule in a gunfight is: Always win and cheat if necessary.")
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To: thackney

Better bring a trailer and find a place to hook up also. Finding a place to hook up in the Eagle Ford play is hard to do. Heard that landowners are selling RV hookups for a price.


19 posted on 11/16/2011 7:38:07 AM PST by wild74
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To: Izzy Dunne

.....obviously an unrequited “peak oil” fan.


20 posted on 11/16/2011 7:39:37 AM PST by Recon Dad ("The most important rule in a gunfight is: Always win and cheat if necessary.")
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To: Vigilanteman

LMAO!


21 posted on 11/16/2011 7:42:18 AM PST by Recon Dad ("The most important rule in a gunfight is: Always win and cheat if necessary.")
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To: spokeshave

Hydraulic fracturing is done on most wells.

Here is an example from Pioneer this year for the planned activities in the year for the Alaskan North Slope.

Note the hydraulic fracturing scheduled from January to mid April, page 2.

http://dog.dnr.alaska.gov/Permitting/Documents/POO_PNRA_Nuna_Exploration_Program_20110919.pdf


22 posted on 11/16/2011 7:45:16 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

Thanx. I’ll pass the info along to him. In North Dakota they were offering $45 per hour for expert welders PLUS free room and meals.


23 posted on 11/16/2011 7:51:07 AM PST by PJ-Comix (Free Depends for OWS Protesters)
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To: thackney
The coldest day of m life was the day I helped load 75,000 gallons of hot oil aboard the ore carrier Masabi Miner at Taconite Harbor, MN.
I think it was 25 below zero with a brisk 30 mile per hour breeze coming off the big lake.
24 posted on 11/16/2011 7:51:23 AM PST by Eric in the Ozarks
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To: Vigilanteman
Back when I lived in North Dakota, we always had a saying that ‘40 below was occasionally necessary to keep the riffraff out.’

I was born and raised in Grand Forks, but left when I joined the USAF.

25 posted on 11/16/2011 7:55:32 AM PST by Mark17 (California, where English is a foreign language)
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To: thackney

OK ...thanks...my oil shale map does not cover Alaska or Hawaii (LOL)


26 posted on 11/16/2011 7:56:33 AM PST by spokeshave (Cain....100% American, 100% Black and 100% for the Constitution...999 an added benefit.)
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To: thackney

The roads are not very good.


27 posted on 11/16/2011 7:58:12 AM PST by Big Horn (Rebuild the GOP to a conservative party)
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To: Eric in the Ozarks

I got to experience -48°F (no wind) in Alpine and wind chill of -72°F at Deadhorse, both Alaskan North Slope.

The -72 I stepped off the plane with my jacket open and no gloves. I hadn’t check the expected temperatures when leaving Anchorage.


28 posted on 11/16/2011 7:58:50 AM PST by thackney (life is fragile, handle with prayer)
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To: spokeshave

Hydraulic fracturing is used in a lot more wells than just shale formations. Over a million wells have been hydraulicly fractured.

http://www.api.org/policy/exploration/hydraulicfracturing/


29 posted on 11/16/2011 8:00:12 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney
Fierce winters — where temperatures drop as low as minus 40 degrees Fahrenheit . . . .

When I lived in Minot, ND from 1978 to 1983 I had the "pleasure" of experiencing a windchill temperature of -115. When the wind blows in ND in the winter, there is NO way to keep warm.

30 posted on 11/16/2011 8:01:15 AM PST by SoldierDad (Proud dad of an Army Soldier currently deployed in the Valley of Death, Afghanistan)
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To: thackney

From a Canadian newspaper. Wonder if they would have an agenda?


31 posted on 11/16/2011 8:03:11 AM PST by blueunicorn6 ("A crack shot and a good dancer")
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To: thackney
Wife and I did the reserve a couple of times.
We got on the airplane at Mpls at -20. Three hours later, we got off in Zihuatanejo and it was 80 F.
32 posted on 11/16/2011 8:05:44 AM PST by Eric in the Ozarks
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To: thackney
Cold weather in North Dakota?
Bet they didn't even think of that!!
33 posted on 11/16/2011 8:06:53 AM PST by HereInTheHeartland (I love how the FR spellchecker doesn't recognize the word "Obama")
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To: blueunicorn6

I have found the Calagy Herald to be one of the best sources of oil & gas news articles. I have read their energy section for many years.

This article was sourced from Reuters. Most of Calgary Herald energy articles are from their own staff.


34 posted on 11/16/2011 8:08:14 AM PST by thackney (life is fragile, handle with prayer)
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To: SoldierDad

Ouch!!! The -72 hurt, mostly because I wasn’t prepared for it. I was outside less than a minute. I was in the -48 for several hours but we went in and out of several buildings for breaks while gathering information.


35 posted on 11/16/2011 8:10:16 AM PST by thackney (life is fragile, handle with prayer)
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To: SoldierDad

grew up in Bismarck, but the coldest i have ever been was in the north Pacific while in the Navy, no idea what the temp was, ice on the water, no wind, just cold to my very core


36 posted on 11/16/2011 8:19:42 AM PST by Docbarleypop
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To: Mark17
Gee, what a waste. The USAF could have transferred you to that big air base just 15 miles away.

Several of my co-workers (USAF veterans) spent part of their enlistment there. I get the definite idea that it was not considered a plum assignment.

37 posted on 11/16/2011 8:30:16 AM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: SoldierDad
FWIW, when I was an elementary school boy, two favorite winter diversions were:

  1. Distance spitting contests to see if it would freeze before it hit the ground. You could actually tell if it did by the shape of the indentation.

  2. Tunneling and trenching. My best friend lived on the opposite side of the block. If the snow was deep enough, you could tunnel right between our back doors. This was especially fun as we would take the snow in the house and dump it in the toilet or shower to melt-- much to the chagrin of our mothers. If it wasn't deep enough, you could still dig a trench deep enough to allow us boys to crawl or even walk between the two houses without exposing your head to the wind.

38 posted on 11/16/2011 8:38:19 AM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: thackney

THE longest night of my life was the graveyard shift I worked while in the Air Force at Minot AFB during one particulary bad winter - I was a walking sentry (Security Police) on the parking ramp for what would normally have been the B-52 Alert pad (nuke loaded). But, the area was under re-mod (yes, in the winter), and all the elecricity was out (including the perimeter security alarms). They placed the KC-135’s on this pad, and the B-52’s were on the KC-135 pad. I was one of two walking sentries posted in this area, and neither of us had any heat. The temperature dipped down to -68 (with windchill). The only shelter was a glass phone booth like enclosure, which was not much shelter. I received three breaks during the night; a half hour lunch break, and two 10 minute periods of sitting in a patrol truck to get warm. Other than that, it was all in the elements. I still have bad dreams of that night.


39 posted on 11/16/2011 8:51:33 AM PST by SoldierDad (Proud dad of an Army Soldier currently deployed in the Valley of Death, Afghanistan)
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To: Vigilanteman

LOL - winter fun.


40 posted on 11/16/2011 8:52:14 AM PST by SoldierDad (Proud dad of an Army Soldier currently deployed in the Valley of Death, Afghanistan)
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To: thackney

My brother is currently in North Dakota in charge of pipeline building and production facilities. He also worked in Northern Alaska in the seventies, operating out of the Naval Arctic Research Laboratory in Point Barrow.
Me, I think I’ll stick it out here in Northern Michigan, where our winters are mild compared to those places.


41 posted on 11/16/2011 12:22:38 PM PST by gigster (Cogito, Ergo, Ronaldus Magnus Conservatus)
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42 posted on 11/16/2011 1:33:56 PM PST by TheOldLady (FReepmail me to get ON or OFF the ZOT LIGHTNING ping list)
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To: Vigilanteman
I get the definite idea that it was not considered a plum assignment.

No it is not and neither is Minot. Actually, when I came back from Vietnam, I tried to change my assignment from Del Rio, TX to Grand Forks. I ended up going to TX anyway. Now that I think back, I am glad I went to TX. Grand Forks was a good place to grow up, but not to live. Many of my high school classmates still live in Grand Forks. I don't think my Philippine born wife, used to tropical weather, could take that cold either.

43 posted on 11/17/2011 12:43:36 PM PST by Mark17 (California, where English is a foreign language)
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