North Dakota & Texas Make Up Half of U.S. Oil Production

U.S. Oil Production
U.S. Oil Production

Combined production from North Dakota and Texas made up nearly half of U.S. oil production according to the Energy Information Administration (EIA) in April of 2013.

Recently, the state of North Dakota hit the 1-million b/d mark for oil, nearly tripling its production over a three year period. The increase in production is directly related to the development of the Bakken Shale. Since April of 2011, production from the Bakken increased 19,000 b/d on average each month, according to the EIA.

Read more: North Dakota Hits the 1-Million b/d Mark

In July of 2014, the EIA predicts the Bakken will produce nearly 1.1-million b/d of oil. June production was 1,074,000 b/d.

Bakken is Major Contributor to U.S. Oil Production Growth

The tight oil and shale gas revolution has changed the face of the energy industry in the U.S., and by 2015, the U.S. is predicted to be the top oil producer in the world, according to the International Energy Agency (IEA). As the country re-asserts itself as a world-wide oil producer, the state of North Dakota is expected to remain in a leading role for oil production.

Texas Leads the Way

The Eagle Ford Shale in South Texas is the only other shale play in the country that can top the Bakken for oil production. State-wide production in Texas was 3-million b/d in April of 2014 according to the EIA. Current production estimates place Texas above the second rated OPEC producing country of Iraq.

Bakken Crude Pushed to West Coast Refining Markets

Bakken Crude Rail Costs
Bakken Crude Rail Costs

Bakken Crude could be pushed out of the Gulf Coast refining market as soon as this year or early next year. That prediction was revealed by Bentek Energy Sr. Analyst Erika Coombs at the annual Benposium Conference in early June of 2014.

Production growth in the Eagle Ford Shale and Permian Basin, and nearly completed pipeline and infrastructure projects for the Permian, will make Bakken crude transport to the Gulf Coast uncompetitive according to Coombs. As a result, oil production from the Bakken is expected to primarily target the West Coast refining markets in Washington and California. 

Although the destination for some Bakken crude volumes may be changing, how it will get there is not. Analysts at the conference said rail will remain the major source of transport for Bakken crude. Approximately 70% of Bakken crude arrives to market by rail.

Read more: Railroads Are Moving 70% of Bakken Oil Production

Currently, pipeline infrastructure in the Bakken is slim, but two new major oil pipelines have been proposed to serve the Williston, including the Double H Pipeline and the Sandpiper Pipeline. At the end of 2013, Enbridge Partners, the company that proposed the Sandpiper Pipeline, announced it reached an agreement with Marathon Petroleum to become an anchor shipper.

Read more: Enbridge's Sandpiper Pipeline Gains Anchor Shipper in Marathon Petroleum - Open Season

Highlights from Benposium 2014

  • Rail will remain the primary source of transportation in the Williston Basin
  • Bakken crude oil transport will shift from Gulf Coast refining market to West Coast
  • Bentek predicts the price of crude oil will dip to $82 by 2019
  • Bakken average drilling days down from 30 - 19 from 2011 - 13

Hess Capital Budget for 2014 Flat in Bakken at $2.2 Billion

Hess' Bakken Acreage Map
Hess' Bakken Acreage Map

Hess plans on committing nearly half of its $5.8 billion capital budget to unconventional shale resources in 2014, with $2.2 billion slated for development of the Bakken. That's the same figure Hess earmarked for development spending in the formation for 2013, but the company's strategic focus is slightly different this year as shale costs shrink.

Although overall investments in infrastructure are down slightly, Hess still plans on allotting $350 million for completing the expansion of the Tioga Gas Plant and associated pipeline and compression projects.

Also read:Alliance Pipeline's Tioga Lateral Is Online & Moving Gas Onto Its Mainline System

Greg Hill, President and COO, said, “as a result of lower well costs and decreased investments in infrastructure projects we plan to operate 17 rigs versus 14 last year and to bring 225 new operated wells online in 2014 compared to 168 in 2013.

The other nearly 10% of Hess's capital budget for unconventional shale resources will be in the Utica Shale in Ohio, with $550 million for drilling approximately 35 wells targeting the wet gas window. That's up $95 million from the company's investment in the area last year, but that does not necessarily mean that the company's focus is shifting away from the Bakken. It does indicate however that Hess is diversifying its interests in unconventional shale resources.

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