Carpe Diem

6 facts about North Dakota oil

Image Credit: Shutterstock

Image Credit: Shutterstock

The six North Dakota oil facts below were collected from this article in the Minot Daily News, which profiled a recent presentation by Tessa Sandstrom, the communications manager for the North Dakota Petroleum Council (a Bismarck-based trade association representing more than 400 members in all aspects of the oil and gas industry, including production, refining, pipelines, transportation, and mineral leasing):

1. Oil production in North Dakota has increased more than 600% in the past several years, from 35.7 million barrels of oil in 2005 to 237 million barrels in 2012. In 2005, North Dakota was the No. 8 oil-producing state in the nation, and in just seven years has moved up to become the No. 2 state for oil output in 2012, behind only No. 1 Texas.

2. North Dakota provides about 11% of the U.S. oil production and the Bakken accounts for 40% of the nation’s increase in domestic oil production in recent years.

3. North Dakota has been an oil-producing state for about 60 years, and there have been some past boom cycles but the present one is entirely different from the previous ones. For example, in those past years the success rate was around 30%. With horizontal drilling and hydraulic fracturing, there is a 99% success rate.

4. As of February, the state had 8,500 wells and was producing about 779,000 barrels of oil per day. With the current technology, each well is expected to produce for about 30 years, and each one will produce about 550,000 barrels of oil.

5. To drill a new oil well in the Bakken costs about $10 million, and each well will generate about $20 million in net profit. Each well pays about $4.4 million in taxes, $7.6 million in royalties, $1.6 million in salaries and wages.

6. An economic impact study in 2005 estimated that the oil boom had a $4.4 billion impact on North Dakota’s economy, but that has increased now by almost 600% to $34.4 billion. There are about 40,856 petroleum industry jobs in North Dakota; along with the roughnecks, truckers and other employees working directly with the drilling operations in the oil patch, there are an estimated 18,000 indirect jobs supporting the petroleum industry that include workers in legal services, administrative, communication professionals, and human resources.

MP: To help put the economic impact of oil on the North Dakota (and US) economy into perspective, it’s as if there are now 8,500 “small businesses” (wells) operating in the western part of the state, and each of those “small businesses” are paying millions of dollars in royalty payments to local landowners and farmers, they are employing hundreds of workers and paying good salaries and benefits, they are generating millions of dollars of profits for the owners of the oil companies, and they are paying millions of dollars in taxes to local and state governments. With 8,500 profitable “small businesses” (wells) operating in the state, double the number three years ago, and increasing at the rate of about five new “small businesses” every day over the last year, it should be pretty easy to understand why North Dakota is frequently referred to as “America’s economic miracle state.”

HT: Bruce Oskol

16 thoughts on “6 facts about North Dakota oil

  1. As of February, the state had 8,500 wells and was producing about 779,000 barrels of oil per day.

    That is 91 bpd. Not exactly very productive. And note that dry wells and capped wells are not counted. This bit of reality shows why ND is not the solution to the American oil problem but one last gasp effort to make a few bucks from yet another bubble.

    With the current technology, each well is expected to produce for about 30 years, and each one will produce about 550,000 barrels of oil.

    But this is not true. Shale wells deplete at more than 50% per year and start at an IP of a few hundred barrels. A typical Bakken well reaches stripper status in around seven years and does not get to 550,000 barrels of oil. While there are a few such wells they are the exception, not the rule.

    5. To drill a new oil well in the Bakken costs about $10 million, and each well will generate about $20 million in net profit. Each well pays about $4.4 million in taxes, $7.6 million in royalties, $1.6 million in salaries and wages.

    It will generate profit only if the EURs are valid. But the actual data shows that the true recovery rates are a fraction of the stated estimates. Note that the ND bureaucrats do not provide a well by well analysis, which would be very easy to do in an era of databases and computer programs. Instead they aggregate everything and muddy the waters. But all we really need to know can be found here. Depletion does not sleep; hoping and wishing is not enough.

  2. Additionally, this is $23.7 billion of revenues that didn’t go to some US hating, terrorist sponsoring, land and sea polluting country that might decide to turn off the tap at any moment. People often whine about the loss of US manufacturing jobs to China, then in the same breath demand that we stop fracking. Often these people are celebrities that will make these comments before jetting off (in their foreign made private jet) to a foreign country to film a movie.

  3. People often whine about the loss of US manufacturing jobs to China, then in the same breath demand that we stop fracking. Often these people are celebrities that will make these comments before jetting off (in their foreign made private jet) to a foreign country to film a movie“…

    Speaking of celebrities: Actress Daryl Hannah, center, joined environmental leaders who tied themselves to the White House gate to protest the Keystone XL oil pipeline. She was later arrested

    You’re spot on dave

  4. Comment 6 – An economic impact study in 2005 estimated that the oil boom had a $4.4 million impact on North Dakota’s economy, but that has increased now by almost 600% to $34.4 billion.

    Shouldn’t the $4.4 million be $4.4 billion? Otherwise it would be a 6000% increase…

  5. And so two small points : Very little of this is happening on federal lands such that the federal fisc is denied the royalties / lifting fees of production . And second that the anti-fracking/ anti Keystone crowd become every day less serious, even now rather silly, if not completely deranged . The only ones who take them seriously are the ignorant dopes in Hollywood and the bien pensants at NPR .

    • I’d rather the royalty money go to hard working Americans than the hardly-ever working government.

      While I don’t want to see the pollution spread around, I think the US has some of the most stringent environmental regulations. My niece has worked in the oil patch in Russia as an engineer and it was SOP to pour excess solutions on the ground. Now she’s in Alaska and a spill of a single drop is a paperwork nightmare.

  6. Just wait…VangelV will arrive shortly to keen and kvetch that only a small percentage of well in the “core area” are economic. The balance–and vast majority–of the wells are OMG MONEY LOSERS!!1!1

    After that opening salvo, expect a magnificent display of enigmatic hand-waving about the 10-Qs or 10-Ks revealing the actual illusion of wasting even more money on money-losing wells continuing apace. I suspect that LartardG. and VangelV and Mureigo and several other prodigious internet trolls have a secret club, where they administer electroshock therapy to each other in a futile attempt to suppress all of that self-professed intellect that they identify within their teeny tiny noggins.

    On topic, drill baby, drill! Energy independence is an empty phrase, due to the fungible nature of oil, but the more that gets produced here, the less we have to pay. Good news all around, except to the monomaniacal dystopians amongst us, of course.

    • They are cornucopias of misinformation; there luddite wishes and hopes do not make for the facts. It won’t be long before that crowd will be forced to deny the existence of ND or that ND is really part of Canada.

      And investing $10 million to create $20 million in after tax/expense profits is not capital depletion, its called capital creation. All of the companies engaged in the ND energy patch and answerable to their shareholders would have been gone years ago if they were depleting capital. They–the insiders–know their own bottom line; the deniers–the outsiders–only know denial.

      • You remind a lot of Roubini, another strident and ubiquitous Luddite shill that keened about crashes for so long that he was bound to be correct…eventually. The economy and oil are cyclical. They always have been and always will be. You will be vindicated in your eschatological predictions about oilfield collapses. Eventually. Because, eventually, the price of oil will drop and many of these wells be be uneconomic to operate. However, continuing to posit that many (or most) of these wells are money losers is retarded. On one recent thread, we saw a self-professed petroleum expert assert that the current drilling technique involves subterfuge and fraud to develop the fields and then foisting them off onto a bigger sucker. Really? Exxon, for instance, doesn’t have its own experts in geology, petroleum, chemistry, finance, law, etc. to meticulously examine the data? They wouldn’t have legal recourse when they putative fraud was discovered after the fact?

        Really? You go ahead and keep on believing such nonsense. You’ll be right one of these days, VangelV. Maybe. For you, I wish it to be true. But your continual screed is nowhere close to being factual and reflective of current reality.

  7. According to the state tax commissioner, North Dakota’s oil tax revenues could top $3.5 billion when the state’s current two-year budget ends. Oil prices have stayed close to the Legislature’s original forecasts, but production levels have been significantly higher than expected.

    The state’s 2011-2013 budget, which was completed in the spring of last year, estimated that western North Dakota’s oil fields would eventually generate 425,000 BPD. However, in May, the average daily output was nearly 640,000 barrels.

    Thirty percent of the revenue being generated by North Dakota’s oil and gas boom goes into a state oil tax fund, which cannot be touched for another five years.

    However, a share of the money goes to trust funds that benefit schools and water projects. Another portion goes to a state fund aimed at cutting property tax rates, and another share is allocated to local governments in the western counties where the oil is being extracted.

    The energy plan that North Dakota officials developed almost a decade ago appear to be paying off for the state.

    • No doubt the energy boom that ND is enjoying is greatly helping the state’s finances. It also sounds like they have a plan to prevent anyone from going crazy and spending it like a drunken congress (they spend way more then any sailor has, drunk or sober!).

      But I wouldn’t give the government any credit for their energy boom. They were lucky enough to have shales beneath their surface and smart enough to get out of the way and let people explore and produce it. More likely, the shales exploration happened and it never dawned on them to oppose it unlike some other states have.

  8. Mark,

    8500 wells producing 550.000 b in 30 years is 4.6 billion barrels of oil in total. The world consumes about 85m barrels per day, so this would last about 55 days.

    I certainly agree with you that shale oil is a significant source of oil for the US but I don’t think it is enough to shift peak oil decades out into the future. At least not currently.

    We would be needing a ND Bakken field every quarter just to stay in the same place or the technology to increase the recovery needs to improve an order of magnitude more.

    To me, this race is not done yet.

    • And you are just one of 300 million and you don’t count. Just counting production of ND to the whole world oil consumption is crazy at best. The fact is that the total world production combines to meet world demand and will last until humankind can come up with another source of energy that can compete economically with oil. Economics is the best way of developing energy sources.

      • Joey,

        Why is this ‘crazy at best’?

        It seems to me that to avoid peak oil, we need to develop new oil resources at least as quickly as we are consuming them.

        ND is a significant oil resource but it will only push peak oil back for a quarter. We need 4 of these fields per year. That’s a lot.

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