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North Dakota crude oil production fell in May beyond natural declines

August 20, 2020 by EIA Gov

August 20, 2020North Dakota crude oil production

Source: U.S. Energy Information Administration, using data from Petroleum Supply Monthly (PSM), Short-Term Energy Outlook (STEO), and Enverus Drillinginfo
Note: Production implied by decline consists of wells with more than three months of non-zero production. A hyperbolic decline curve was fit to historical well-level production to estimate the natural decline in production from each well. Production from the PSM and STEO reflect estimated production from all producing wells in North Dakota.


Between December 2019 and May 2020, crude oil output in North Dakota fell from an average of 1.5 million barrels per day (b/d) to 0.9 million b/d, a decline of more than 615,000 b/d (41.6%). This production decline is greater than it would have been if producers solely halted new drilling and allowed production from current wells to naturally decline.

With only natural declines, the U.S. Energy Information Administration’s (EIA) analysis of Enverus’s data (which covers most, but not all, wells operating in North Dakota) indicates that crude oil production for most of North Dakota would have been approximately 1.1 million b/d in May 2020, 0.4 million b/d more than those wells actually reported. This difference suggests that many producers decided to reduce production from their existing wells beyond the volume the wells would have naturally declined.

The principal driver of North Dakota’s production decline was low crude oil prices. After averaging $55.70 per barrel (b) throughout 2019, monthly prices in North Dakota (defined as the average of the Bakken Clearbrook and the Bakken Guernsey prices) averaged $29.82/b in May 2020 after having declined as low as -$38.13/b on April 20. According to survey data from the Federal Reserve Bank of Dallas, the region’s producers need prices of at least $28/b on average to cover their operating expenses and $51/b to encourage the region’s average producers to drill new wells.

North Dakota Bakken formation average crude oil price

Source: U.S. Energy Information Administration, using data from Bloomberg L.P.
Note: Price calculated as the average of the Bakken Clearbrook and Bakken Guernsey spot prices.


In response to these price signals, most North Dakota producers reduced production, which was accomplished in at least one of three ways. First, some operators chose to completely halt production at some of their wells. As a result, although North Dakota had an average of 16,000 producing wells in December 2019, by May 2020, that number had fallen to 12,800 wells, the lowest level in more than four years.

number of producing crude oil wells in North Dakota

Source: U.S. Energy Information Administration, using data from the Oil and Gas Division of the North Dakota Industrial Commission and Baker Hughes, accessed via Bloomberg L.P.
Note: May 2020 value for the number of actively producing wells is preliminary.


Second, many producers elected to stop or reduce drilling new crude oil wells, which is normally required to offset the natural decline in production volumes from mature wells. According to Baker Hughes, an average of 12 oil and natural gas rotary rigs were actively drilling new wells in North Dakota in May 2020, which is significantly fewer than the 50 operating in December 2019 and is the lowest level in at least 12 years.

Finally, some producers opted to reduce, but not completely halt, production from some of their wells. This trend is observable in the changing productivity of North Dakota oil wells, which fell from an average production rate of 94 b/d per well in December 2019 to 70 b/d per well in May 2020, the lowest level since May 2011.

North Dakota crude oil production per well

Source: U.S. Energy Information Administration, using data from the Oil and Gas Division of the North Dakota Industrial Commission


EIA does not expect North Dakota crude oil production to decline further, however. In its August 2020 Short-Term Energy Outlook, EIA forecasts that a combination of higher crude oil prices and increased refinery demand for crude oil inputs will increase oil production in North Dakota to an average of about 1.2 million b/d between August 2020 and July 2021 (83% of the December 2019 level).

Principal contributor: Jesse Barnett

Original source: EIA.gov

Filed Under: Breaking

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