Soaring ND oil production to get another boost

North Dakota's already burgeoning oil production could soar another 50 percent next year as the state's capacity to export crude catches up with its ability to pump it, state regulators and industry officials say.

If oil prices stay above $60 a barrel and contemplated oil transportation projects become reality, the state could be producing 400,000 barrels of oil daily within five years, said Lynn Helms, director of the state Department of Mineral Resources.

North Dakota's current production now exceeds 230,000 barrels a day, which ranks the state behind only Texas, Alaska and California. The state's output supplies about 2 percent of the nation's domestic crude oil output.

It is expected to approach 350,000 barrels next year, an increase of more than 50 percent, because of a major pipeline expansion and the anticipated startup of a shipping terminal near Stanley that will be able to haul 60,000 barrels a day by rail to refineries near Cushing, Okla.

More expansion being planned by the pipeline companies Enbridge Inc. and Kinder Morgan Energy Partners LP would allow another boost that could put the state's daily production at 400,000 barrels, Helms said.

"Realistically, we could reach the ceiling within five years," he said. "We might be able to get there sooner, just depending on oil prices and drilling activity."

Last August, producers were pumping about 231,000 barrels of oil daily from western North Dakota, Department of Mineral Resources figures show. In August 2008, daily production was about 180,000 barrels; in August 2005, it was just under 100,000.

State regulators say 59 drilling rigs are now working in western North Dakota's oil patch. Many of them are exploring the region's Bakken oil shale, which has become a prolific producer in recent years.

The number of drilling rigs could jump to 100 as more oil shipping capacity opens up this spring and summer, Helms said. "We'll have (transportation) space to fill, and the operators are gearing up to make that happen," he said.

Ron Ness, president of the North Dakota Petroleum Council, said drilling money has begun flowing anew to North Dakota after a hiatus prompted by lower oil prices.

"The Bakken is clearly the biggest oil play in the United States. I think we're seeing the investment come back, and 2010 should be a pretty amazing year," Ness said.

Enbridge, a Calgary, Alberta-based company, operates an oil pipeline system that carries crude from western North Dakota and eastern Montana to the company's terminal at Clearbrook, Minn. By April, the company expects to finish expanding the line's capacity by about 51,000 barrels a day.

Separately, EOG Resources Inc., of Houston, Texas, is finishing a rail shipping terminal near Stanley that will be capable of loading 60,000 barrels of oil onto one 100-car unit train each day.

Construction of the rail yard began last spring. Mark Papa, the company's chief executive officer, said during a conference call with financial analysts last week that the terminal should begin operating in February.

Helms said EOG Resources will use the daily trains to ship its own western North Dakota production and oil it will buy from other producers. Justin Kringstad, director of the North Dakota Pipeline Authority, said EOG plans to begin testing its facility in December.

Gov. John Hoeven said the transportation development should increase competition for North Dakota crude.

"As we build this infrastructure, it will mean better prices for the oil," he said.