Thursday, October 22, 2015

NDIC Gives Operators An Extra Year To Bring Their DUCs On-Line; Flexibility On Flaring Also Announced -- October 22, 2015

It is "funny" (as in coincidental) how things turn out ... just the other day I mentioned the "one-year-rule" for bringing North Dakota wells on line. And here we are today, it's just announced that North Dakota will extend the deadline by a year. From Seeking Alpha:
  • North Dakota regulators approve a plan to give oil producers an extra year to bring a new well online, Reuters reports, in an attempt to give the energy industry breathing room during the oil price downturn.
  • Companies will now have up to two years to frack drilled but uncompleted wells under changes approved by the North Dakota Industrial Commission, which means the oil industry will not be forced to spend billions of dollars to frack an estimated 1,000 DUCs, most of which will hit their previous one-year deadlines in December.
Also, in The Dickinson Press link below:
In December through March (2016), about 100 wells per month will reach the one-year deadline.
Under the policy approved Thursday, operators can apply to have those wells put on temporarily abandoned status, giving them another year to store the oil in the ground. Royalty owners, land owners and nonoperating interest owners would have the opportunity to object.
Helms said he expects about 500 wells will be put on temporarily abandoned status, which will prompt a gradual decline in oil production from 1.19 million barrels per day to 1.1 million barrels per day at the end of the biennium in June 2017.
Most experts anticipate that oil prices will recover in 2017, Helms said.
“The state would prefer to tax the oil at a higher price at some point in the not-too-distant future as opposed to taxing it today at low oil prices,” Helms said.
In addition, the NDIC granted some interesting flexibility on the issue of flaring. The Dickinson Press reports:
The North Dakota Industrial Commission adopted new policies Thursday to reward oil companies that exceed their gas capture goals and to allow producers to store oil in the ground until prices recover.
Companies that exceed gas capture goals for 90 days can bank credits for volumes of gas captured and apply them to future months if they fall below the benchmarks.
Helms, who recommended approval of the policy, said credits can only be used if a company encounters extenuating circumstances, such as delays getting right-of-way approval for pipelines or if a gas processing facility is down for maintenance.
The policy aims to motivate companies that are barely making the gas capture target, which is currently 77 percent, to raise the bar so they get credits in the bank, Helms said.
The credits expire after three months and they can’t be transferred to another company.
The policy, which originated as a request from an industry task force, takes effect Nov. 1.
Helms said he anticipates companies to take advantage of the program in the winter, when maintenance issues are more common.
And more:
Last month the Industrial Commission adopted revised gas capture goals that gave the industry an additional 10 months to meet the 85 percent gas capture goal.
In addition, commissioners voted unanimously to grant another six-month exemption from the natural gas flaring policy to XTO Energy for 102 wells, primarily in Dunn County. The commission granted an exemption to those wells in April after a pipeline project failed to move forward. (We've talked about this before.)
The Bear Creek natural gas processing plant under construction by ONEOK will serve those wells and is expected to be complete in fall of 2016.
For me this is the big story: again, operators, royalty owners, surface owners, and the state are working together during a very, very tough time. Good for them; I'm proud of the state.

COP Gets Permit To Drill Off-Shore Alaska

And then get this, COP wins a permit to drill off-shore Alaska, also at Seeking Alpha:
  • ConocoPhillips' plan to build the first-ever oil production facilities at a federal reserve in Alaska is approved by the U.S. Bureau of Land Management, FuelFix reports, allowing COP to construct an 11.8-acre drilling pad and related infrastructure inside the reserve.
  • The project offers Alaska the hope of adding new oil to the 800-mile-long Trans-Alaska Pipeline System, which was originally built to ferry 2M bbl/day of crude away from North Slope oil fields; it now carries about a quarter of that amount as nearby production declines, leading to slower flows.
  • But with low oil prices, it is unclear when or if COP would proceed with its broader Greater Mooses Tooth project, which ultimately could involve drilling up to 33 wells in the National Petroleum Reserve-Alaska.

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