Two Illustrations of Booms and Busts in North Dakota’s Oil Industry

This article, written at just about the very start of the current boom, is from the Bismarck Tribune of Tuesday, February 22, 2005, by Lauren Donovan:

WATFORD CITY — Watford City knows the good, the bad and the ugly.
The good is steady oil production, like now.
The bad was the bust after the ’80s oil boom.
The ugly was sloppy, unsafe operators and the mobile home courts and businesses abandoned in the receding tide of intense development.
The McKenzie County community is catching a new tide and the oil ride is on again.
Oil prices are high, old wells are being put back into production — or re-entered with new technology — and new wells are being drilled in the region.

Mineral acres in McKenzie County are fetching the highest-known prices ever paid in North Dakota’s oil history. That’s primarily because a very rich but thin layer of oil called the “middle Bakken formation” is within reach of known drilling technology.
The middle Bakken play from Belfield to the state line at Sidney, Mont., is poised for a wave of drilling that could bump the state’s daily production over 100,000 barrels.
These are exciting times, but hopefully not, in the immortal words of Yogi Berra, “deja vu all over again.”

Townspeople and ranchers haven’t forgotten.
Gene Veeder heads up economic development for McKenzie County. When he went back home 12 years ago, “Everything was empty and we’ve spent 10 years trying to fill it up.”
Nice and steady is better than a boom any day, he said. Oil production, not exploration, has been Watford City’s bread and butter.
The past year, with more production from new and old wells, was a dandy for the county, Veeder said.

Lynn Helms, director of the State Oil and Gas Division, predicts that between 200 and 400 new and re-entry wells will be drilled annually over the next several years. The prediction hinges on continued high oil prices and whether producers figure out how to successfully pierce the oil-rich middle Bakken with horizontal drills.
Helms’ prediction falls wide of Veeder’s “nice and steady,” but far short of the calamitous drilling frenzy of 20 years ago.

About a decade earlier, in May 1994, Carter Wood of the Grand Forks Herald wrote an article headlined “N.D. OIL WON’T RECOVER SOON COMBINATION OF FACTORS MEANS BUST MAY BE HERE FOR GOOD”:

North Dakota’s oil bust may be here to stay.
Oil once shone brightly for North Dakota, bringing thousands of jobs and millions of dollars to the state. Then prices collapsed and the boom busted.
Workers and their families left, Main Street businesses shut down, and trailer parks stood empty. The impact spread beyond western North Dakota ‘s oil patch, as plummeting revenues forced sharp cuts in state spending.
Now, unless a world crisis erupts — and continues — the industry’s prospects for revival slim.
Industry executives and experts hold out little hope of recreating the boom years of the early 1980s. Even a modest resurgence returning oil to a more important role in the state’s economy seems unlikely.
“In order for those conditions to go back to that level again, we’d be looking at another import embargo that we had in `73 and `79, and we basically had the Persian Gulf War to stop anything like that,” said Lynn Moser, president of the Inland Oil and Gas Corp., a small, family-owned exploration and production company based in Bismarck.

Crude not so sweet
Prices of sweet crude appeared to bottom out earlier this year at about $12 per barrel, jumping last month to above $14.
Nevertheless developments worldwide show few indications that prices will return to $25 to $30, the level needs to revive the petroleum industry in the United States and North Dakota.
“North Dakota in particular has an additional rough row to hoe, because the exploration and development and producing costs are much greater in the Williston Basin than they are in many of the other oil and gas producing basins in the United States, ” said Ken Wagner, region production manager for Amerada Hess in Williston, N.D. . . .
North Dakota’s average rig count stood at 119 during the boom year, it dropped to six. During several weeks this year, only three rigs we’re operating.

“That means right now we’re just producing as we were before (the boom), gradually coming down and as reserves are used up, the industry is just going to continue to decline,” said David Ramsett, chairman of the economics department at UND.
Even if an Armageddon closed off world supply, the domestic industry is ill-equipped to react quickly. A decade of decline meant oil field workers got out of the business, and petroleum engineers switched to other professions. The domestic industry lost 400,000 jobs in the past decade, an estimated 14,000 since November.

Average oil price (per barrel):
1990 — $22.58
1991 — 19.61
1992 — 18.74
1993 — 16.05
1994 — 12.00

Average rig count:
1981 — 119
1982 — 70
1983 — 43
1984 — 51
1985 — 37
1986 — 14
1987 — 14
1988 — 14
1989 — 15
1990 – 20
1991 — 13
1992 — 12
1993 — 10
1994 — 6

Average oil field employment
1985 — 5,186
1986 — 3,297
1987 — 2,583
1988 — 2,775
1989 — 2,467
1990 — 2,750
1991 — 3,050
1992 — 2,400
1993 — 2,200

Advertisements
This entry was posted in Uncategorized. Bookmark the permalink.

One Response to Two Illustrations of Booms and Busts in North Dakota’s Oil Industry

  1. Reblogged this on northdakotaoiljobs and commented:
    Interesting.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s