Coronavirus effects on the oil industry likely to affect North Dakota


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Coronavirus effects on the oil industry likely to affect North Dakota 3

North Dakota oil and natural gas output fell up to 3% in December, while the state’s minerals director cautioned that the coronavirus outbreak could weaken production in the coming months.

The nation’s second-largest oil producer after Texas, North Dakota pumped out 1.48 million barrels of oil per day in December, down 2.85% from the previous month, according to data released Friday by the North Dakota Department of Mineral Resources. December gas production tallied 3.06 million MCF per day, down 2.45% from November. (An MCF is 1,000 cubic feet of natural gas.)

“Unfortunately, there’s not a lot of candy and roses in today’s report,” Lynn Helms, the mineral department’s director, said in a webcast that fell on Valentine’s Day.

Still, oil production during December was close to the historic monthly highs that North Dakota hit in October and November, when production topped 1.5 million barrels per day.

The oil-rig count in North Dakota currently stands at 56, up a tad from the 55 mark in November through January, though down from the low to mid-60s earlier in 2019. A rising rig count is an indicator of more new wells being drilled. Helms said operators see the rig count hovering around the mid-50s for much of 2020.

The oil industry has weathered a shock recently with the spread of coronavirus and consequent fears of declining global oil demand, particularly in China. That country is the world’s largest importer of oil and second-largest economy.

“It’s definitely ‘batten down the hatches’ in the oil and gas industry, even in North Dakota,” Helms said.

OPEC, the global-oil cartel, earlier this week lowered its global-demand forecast largely due to the coronavirus outbreak. Also this week, the U.S. Energy Information Administration cut its global oil-demand forecast, the result of an economic slowdown in China caused by the illness that has infected more than 60,000 people and killed more than 1,000.

Oil prices have taken a hit this year as the coronavirus has spread.

The price of West Texas Intermediate (WTI) — the benchmark U.S. crude — dropped from $ 63 a barrel in early January to a one-year low on Monday of just under $ 50. WTI closed Friday at around $ 52 a barrel, rallying in recent days.

On a different front, North Dakota’s natural gas capture rate improved a bit in December, though it’s still below the state’s goals.

Oil and gas operators captured 84% of the natural gas they produced, flaring — or burning off — the rest. In November, the gas-capture rate was 83%, while the state’s goal is 88% with only 12% flaring. The flaring of natural gas is wasteful and bad for the environment.

The state’s gas-capture infrastructure — pipelines and processing plants — hasn’t kept up with the production of gas, which is essentially a byproduct of oil production. Helms said that December’s decline in oil output was largely caused by operators purposely curtailing production to limit flaring.


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