Bakken operators told to cut flaring or face crude caps

North Dakota, the second-largest U.S. oil-producing state amid booming output from shale, plans to punish crude explorers that fail to curtail the burning of natural gas as waste.

Energy companies that don’t curb so-called gas flaring will face limits on the amount of oil they can pump from the Bakken shale formation, the North Dakota Industrial Commission said in a statement today, July 1.

North Dakota is cracking down on flaring that increases air pollution and also casts a glow in the night sky that can be seen miles away from remote well sites. Oil companies routinely burn off gas that emerges along with crude from wells when local pipelines or demand are insufficient to absorb the fuel.

North Dakota’s daily crude output surpassed 1 MMbbl in April for the first time in history, making the state a bigger oil supplier than OPEC members Ecuador or Qatar. In the U.S., Texas is the only state that pumps more crude than North Dakota, according to the Energy Department.

The industrial commission wants a 26% reduction in gas flaring statewide by the fourth quarter of this year and another 23% by the first quarter of 2015, according to the statement. The commission is comprised of Governor Jack Dalrymple, Attorney General Stenehjem Wayne and Agriculture Commissioner Doug Goehring.

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Four wastewater wells tied to Oklahoma quake surge, study says

Four wastewater wells used in oil and natural gas drilling may be responsible for triggering 20% of all earthquakes in the central and eastern U.S. from 2008 to 2013, according to a study published in the journal Science.

The wells are used to dispose of high volumes of wastewater released from underground rocks when they are fractured using modern oil-drilling techniques. The four wells are likely responsible for a dramatic rise in earthquakes near Oklahoma City since 2009, according to the research.

Oklahoma has had more earthquakes than California so far this year, making it the most seismically active state in the continental U.S. and raising suspicions that drilling activity is influencing a surge in temblors there. The state had 238 earthquakes with a magnitude 3.0 or greater through June, more than double the number in California, which has historically ranked second in earthquakes behind Alaska.

Scientists studied wastewater-injection volumes, geologic information and data from earthquake sensors to show that fluids pumped into the wells increased underground pressures and spread them. The area of elevated underground pressure grew in a way that overlapped with a “migrating front” of earthquakes centered near Oklahoma City.

The data showed that water pumped into wastewater wells can increase and affect underground pressures as far away as 35 km (22 miles), potentially triggering earthquakes at faults that would have previously been considered too distant.

Researchers from Cornell University, University of Colorado, Columbia University, and the U.S. Geological Survey collaborated on the study.

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Beach Energy has taken a 20% interest in an exploration permit at the offshore Otway basin in Tasmanian waters

Beach Energy  has executed a binding sale and purchase agreement (“SPA”) for the purchase of a 20% interest in the T/49P offshore exploration permit in the  Otway Basin from 3D Oil.

In addition to this, Beach and 3D Oil have established a new joint venture by executing a joint operating agreement (“JOA”). Under the terms of the SPA, Beach will pay 3D Oil $3 million in cash with 3D Oil to remain as operator under the JOA. It is anticipated that the joint venture will commence a 755 sq km seismic acquisition program within the next twelve months, with timing subject to regulatory approvals. This work is the major commitment required to be undertaken in the initial exploration phase of the permit, with the Transaction subject to the usual government and regulatory approvals.

The T/49P permit, located approximately 20 km to the west of King Island, is 4,960 sq km in size with water depths of around 100 m. Adjacent to the permit are the Geographe and Thylacine gas fields, of which Thylacine is the largest field discovered in the Otway Basin to date.

The Transaction builds on Beach’s current position in the onshore Otway Basin, which services both South Australia and Victoria in terms of gas supply.

In relation to Beach’s onshore activity, the second well of a two well exploration program on the South Australian side of the onshore Otway Basin, Bungaloo-1, recently reached total depth. Initial observations from Bungaloo-1, and the first well in the program, Jolly-1, indicate good exploration potential for gas and liquids in both shallow conventional structural traps as well as deeper targets within these wells. Follow up analysis is being undertaken to confirm these initial observations, with a priority focus on the conventional potential within the permits operated by Beach.

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Sercel lands another order for 508XT system

CGG has announced that, in addition to the first two 508XT systems being delivered to the industry this month, Sercel has also sold a system to PanAmerican Geophysical for delivery in July.

The system' s X-Tech architecture allows it to combine the benefits of both cable and cable-free systems in a single platform.

Dave Pratt, Chairman, PanAmerican, said: “We are excited to be the first to deploy the 508XT in North America, having chosen the system based on its unique features which will allow us to achieve the highest levels of production while greatly reducing the number of batteries that need to be deployed and maintained.”

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North Dakota crude oil production barrels past 1 MMbopd

North Dakota, which became just the fourth state to record oil production above 1 MMbopd, could see even stronger growth over the summer as improved weather makes life easier for drilling crews.

Output increased to 1,001,149 barrels a day in April, the state’s Department of Mineral Resources reported yesterday. Texas, California and Alaska have crossed the million-barrel mark. Only Texas remains above the state, at almost 3 MMbopd.

April oilfield work was hampered by heavy rain that shut roads and strong winds that closed down operations. Crews completed 200 wells during the month, and another 600 are already drilled and just waiting on hydraulic fracturing, or fracking. Better weather in the summer months should allow more new wells to start gushing oil.

“As the weather improves, operators should have full utilization of all their rigs, and possibly additional completion crews to whittle down the backlog,” Jonathan Garrett, an upstream analyst at Wood Mackenzie Ltd. in Houston, said in a phone interview today. “I wouldn’t be surprised to see quite a bit of production growth over the summer. It should be pretty impressive.”

Oil and gas from the Bakken and other shale formations helped the U.S. produce the equivalent of 87% of its energy needs in 2013, the highest level since 1985, according to data from the Energy Information Administration. The U.S. imported 7.7 MMbopd in 2013, the least since 1996.

Hydrocarbon-Rich

Most oil produced in North Dakota comes from the Bakken and Three Forks shale formations, layers of hydrocarbon-rich rock more than a mile beneath the Earth’s surface. High crude prices and improvements in drilling technology have helped companies like Continental Resources and Whiting Petroleum tap into the previously inaccessible shale.

Output from shale wells declines by 60% to 70% in the first year, according to Austin, Texas-based Drillinginfo Inc., faster than traditional wells. Because of the steep decline rate, companies need to finish new wells constantly. Bad weather can slow the completion process, curbing production growth.

Adverse Weather

In April, roads were shut for three days because of heavy rain, and there were nine to 11 days of wind blowing faster than 35 mph, too strong for completion work, Lynn Helms, the director of the state’s Department of Mineral Resources, said during a conference call with reporters yesterday. The weather in May and June has been much more benign.

“Permitting and drilling activity indicates that we’ll continue to see production grow and build well above 1 MMbopd,” he said.

Producers are also drilling better wells, Garrett said. They’re increasing horsepower and using more water and sand in the fracking process, which is helping to increase initial production and slow decline rates.

Bakken crude priced at Enbridge Inc.’s pipeline hub at Clearbrook, Minnesota, traded at a discount of $6.50 less than West Texas Intermediate in Cushing, Oklahoma, at 8:59 a.m. New York time, according to data compiled by Bloomberg.

About 30% of North Dakota’s oil left the state by pipeline and 63% by rail in April, according to the state’s pipeline authority. It’s the lowest percentage of rail transportation since September.

It costs $9 to $10 a barrel to transport oil by train to East Coast refineries, and $6 to $7 a barrel to rail crude to Washington plants, Tesoro Corp. said in a February presentation to investors.

The discount of Bakken crude priced at the wellhead to Brent crude, the benchmark for global waterborne crude, is about $20.71 a barrel, according to data compiled by Bloomberg.

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