Saturday, March 3, 2012

For Archival Purposes: North Dakota Gets Good Report Card on Clean Air

Link here to the Bismarck Tribune.
North Dakota’s air quality regulators achieved a significant victory Friday when the federal Environmental Protection Agency said it would accept the state’s regional haze air quality plan for two disputed power plants.

The decision means neither Minnkota Power Cooperative’s Milton R. Young Station at Center or the Basin Electric Power Cooperative Leland Olds Station at Stanton will have to install the EPA’s preferred pollution technology, saving each operator hundreds of millions of dollars.

Largest Contract Ever in McKenzie County for Single Road Repair -- The Bakken, North Dakota, USA

Link here to the Bismarck Tribune.

The specifics are not that important: $17 million to patch a county road in McKenzie County.  It is a 12-mile "connector" road northeast of Watford City, near the ONEOK Garden Creek natural gas facility, if I'm not mistaken.

What makes the article worth reading are all the data points. This one might be the most important data point: of all the active drilling rigs in North Dakota, one-fourth of them are in McKenzie County; 55 rigs currently in that county. 

This is smack dab in the bull's eye of the Bakken.

SeekingAlpha on $5 Gasoline

Link here to It is a very long article. But here are a couple of nuggets (nothing new in my book).

First, consumption and production:
The world we inhabit today is a much different world than the one that existed 10-12 years ago. China has now become the world's second largest economy after the U.S. According to a recent IEA report we are facing a problematic global economic backdrop leading to a two-speed economic outlook-robust demand in non-OECD countries and falling demand in OECD nations. The result is that oil demand is expected to contract by 400,000 bd in the western world and increase by 1.2 mbd in the non-western world. The result is that oil demand continues to grow. After falling for two consecutive years, global oil consumption grew by 2.7 mbd in 2010. OECD consumption grew by 0.9% or 480,000 bd, a first since 2005. Non-OECD demand grew by a record 2.2 mbd, or 5.5%. Most of that demand growth occurred in China and the Middle East.

We have now surpassed the consumption levels reached in 2008. The IEA estimates that oil demand is forecasted to climb to 89.9 mbd in 2012, a gain of 0.8 mbd, an increase of 0.9% over last year. But where is all that increased oil going to come from? [Comment: well, for starters, the Bakken alone will be producing close to 0.6 million bopd by the end of the year]. In addition to worries over the loss of Iranian exports of 2.6 mbd, Libyan oil production is still down by 600,000 bpd from its peak before the civil war. Unrest in Yemen has knocked off roughly 250,000 bpd. South Sudan has stopped pumping 260,000 bpd day due to disputes over payments for use of its pipeline and export facilities. Civil unrest in Syria has led to a reduction of output by 200,000 bpd and Nigerian output has fallen by 20,000 bpd.
In round numbers that's over 1 million bopd currently not being supplied; but you know, there's always unrest somewhere, problems somewhere. I assume on any given day over the past twenty years one can find excuses for "lost" oil -- remember the burning Kuwaiti oil fields under George I; and I don't think Iraq was exporting a lot of oil under George II's era of "shock and awe."

But I digress.

What about the 2.6 million bopd that comes off the market if the Obama-Iran embargo goes into effect? Something tells me, this will all be worked out -- at worse, with "smoke and mirrors" behind the scenes; there's no way the Obama administration can manage a global loss of 2.6 million bopd effective July 1. It ain't gonna happen. If that much oil is taken out of production, it will be interesting to hear Bill O'Reilly, et al, talk about "speculators" again. It won't be speculation; it will be reality.

The linked article confirms my suspicions about Saudi Arabia's ability to respond with spare capacity, and so the same with the US Strategic Petroleum Reserve. Saudi is hard-pressed to make up that difference. Especially if pipelines are blown up or if oil-loading terminals are closed due to blowing sand.

With regard to refining:
The refining business has become unprofitable. Thirty-one (31) uneconomic refineries have been shut down in recent years, with two dozen more on the chopping block. Refiners earn an average profit of $11 for every barrel they process. That equates to $0.26 a gallon, about the average profit over the past decade. By comparison state and federal taxes average $0.39 per gallon. Now who is being greedy, the oil companies that do the work of refining oil or the governments that collect a tax?
Bottom line:

One can always find examples of disruptions in oil supply, so I don't get too excited about the "lost" one million bbls noted above from Libya, South Sudan, Yemen. The author didn't mention a similar amount in new oil coming from the likes of Utica, Bakken, Permian, and Eagle Ford. So, that's a wash.

On July 2, 2012, there may be folks arguing that the embargo has taken effect and/or is effective, and there may be folks arguing that the embargo hasn't happened and/or isn't effective, but I honestly don't think come July 1, 2012, I'm going to wake up and read that 2.6 million barrels of Iranian oil is suddenly off the market.

207: New Record -- Active Drilling Rigs in North Dakota


March 26, 2012: in the daily activity report this date, another Kalil well reported, which I had already noted in the post below (#21125).  No IP yet.

Original Post

Sometime ago, I honestly thought 200 rigs were about the limit. Some companies have mentioned they are pulling some rigs out of North Dakota (e.g., OXY USA); others have suspended operations temporarily (CHK).

But the drilling goes on despite challenges.

Some of the challenges:
“We’re still out of water, we’re still out of sewage capacity, we’re short of electricity and there’s no room on the highways for anyone else,” Kalil said.
But the drilling goes on; Bull Butte oil field is a particularly active field, and a pretty good field, also:
  • 8048, DRY, Mosbacher Production, W. D. Kalil, 24-156-103; s10/80;
  • 18456, 1,334, BEXP, Kalil 25-36 1561-H, Bull Butte,  25-156-103; s12/09; t2/10; AL; cum 90K 1/12
  • 19412, 1.425, BEXP, Kalil Farms 14-23 1H, Bull Butte, 14-156-103; s9/10; t5/11; AL; cum 54K 1/12
  • 19661, 999, BEXP, shares pad with 19412, Bull Butte, 14-156-103; s10/10; t5/11; AL; cum 56K 1/12
  • 21125, conf, BEXP, Kalil 25-46 2H, Bull Butte, 25-156-103; 10,440 bbls in 1/12 (days of production not given); 10,440 bbls in first month of production (1/12) -- unknown number of days
  • 21126, 1,574, BEXP, KLT 24-13 1H, Bull Butte, 25-156-103; s8/11; 13K in 1/12 (days of production not given)
  • 21626, conf, BEXP, pad 500 feet or so north of terminus of #21126; Bull Butte, 
Even as the county commissioners were a) asking oil companies to slow down; b) complaining that infrastructure could not support additional drilling or additional rigs; and, c) bringing their concerns to the state legislature, the drilling continued, and the rig count increased. Permits/file #'s 21125 and 21126 are most interesting, being drilled during the voiced concerns.

Good news: No mention of the food shortage in Williston at the most recent meeting (at least not reported/quoted), so at least in one respect things seem to be improving. 

As I've noted before: those with wells are among the first to say "slow down"; those waiting for their wells to come in are saying, "go faster."

Five years into this boom and we're still short electricity, sewer, water?

Oh, by the way, I won't be able to find it now, but sometime ago, I noted that in some cases wells were being given less descriptive names (rarely, but notable), and some wells have had original names changed to delete the family name.

Man-Camp Moratorium No Longer An Issue, But Reasoning Is Specious


March 3, 2012: Link to Debbie Downer. Stark County bans all new man-camps. As noted below, this is not a big deal. McKenzie County will take up the slack. The commissioners provided a multitude of reasons; did not say anything about their dislike for men living together. See Richardton. Abbey. Just say "no" to millions of dollars.

Original Post

Link here to the Bismarck Tribune.
The moratorium would have expired next week, but commissioner Dan Kalil said the reasons for it being put in place haven’t changed.

“We’re still out of water, we’re still out of sewage capacity, we’re short of electricity and there’s no room on the highways for anyone else,” Kalil said.

Williams County has already approved 9,777 beds, and approximately 6,600 of those have actually been built, meaning there’s still another 3,000 beds or so before approved permits are maxed out.

Kalil said the commission’s discussion revolved around what kind of development it prefers for the county.

“If these companies need places for workers, they can build apartment buildings. They can make long-term investments. If this (oil development) is going to last another 20 to 30 years they can add some value to the community rather that set out more of these temporary beds,” he said.
This is not a major issue any more, the decision to ban additional man-camps. The reasoning is a bit specious. As far as I know apartment buildings use water, sewer, and electricity. If the boom is a bust, temporary man-camps go away; apartment buildings will remain, empty. 

But, this is why the Williams County decision is no longer a big deal:
  • infrastructure is catching up
  • companies are looking to contain costs this year and may actually cut back in some areas
  • there are still about 3,000 beds approved yet to be added (30% of existing total)
  • there are about twelve (12) new motels/hotels in Williston since the boom began
  • countless number of apartment complexes have gone up since the boom began
  • single-unit housing has increased significantly since the boom began
  • the activity is moving south of Williston
  • Minot will gladly take the higher earning, white collar, management and professional segment
  • McKenzie County is still in an "expansionist move" and will take up the slack
  • too many inexperienced mom-and-pop operators wanted to get into the man-camp business
  • the agreement to allow consideration of the current man-camps to expand: most of these are professionally run, state-of-the-art
The only thing more man-camps might bring now are a) more mom-and-pop start-ups; and, b) lower nightly rates.

For newbies:
The North Dakota Bakken has two centers of activity: the north, and the south. The south is in the Dickinson area and will eventually see growth but right now it is not experiencing the growth that the north is experiencing. The north is centered in four counties: Williams, Mountrail, McKenzie, and Dunn.
Mountrail County took the initial lead but is now less active relative to the other three counties. The Sanish remains huge but Whiting is in manufacturing mode there and a status quo has developed. There are adequate resources.
Dunn County is dominated by the reservation. There is a lot of activity there; it will probably be more active than Mountrail over the long term, but it, too, seems to be in manufacturing mode and making do with the available resources.
Williams County has two areas of interest: north/northwest/northeast of Williston, and east/southeast of Williston. The first area will be developed more slowly; it's good, but not great, and CLR seems to have this area also in manufacturing mode, making do with the available resources.
McKenzie County has two areas of  interest: the northeast/north (just directly south of Williston and also northeast of Watford City; and, all the rest of the county.  The first area, the northeast/east area of McKenzie County and the east/southeast area of Williams County is the bull's eye of the Bakken in the north. This is where the activity is headed in 2012. As noted above, McKenzie County is still in expansion mode and will make up for any shortfall in man-camps due to moratoria in surrounding counties.