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Petroleum

Oil pumpsPetroleum is an integral part of the North Dakota energy picture. In 2012 North Dakota surpassed both California and Alaska to become the second largest oil producing state, behind only Texas.  North Dakota is also a significant point of entry for Canadian crude oil traveling by pipeline to markets in the Midwest. North Dakota’s oil and gas industry has been significantly impacted by the combination of over-production and burgeoning supplies, at a time of reduced demand worldwide. According to the U.S. Energy Information Administration, the price of sweet crude oil fell to $39.26 a barrel in February 2016, as compared to the all-time high price in July 2008 of $133.48 per barrel. Prices in the last half of 2016 have ranged between $44 – $52 a barrel. Despite this, increased efficiencies and technology have enabled operators to continue production and remain competitive at lower prices.

  • Average rig count in 2016 was 35 rigs, a decrease of nearly 56 rigs from the previous year and more than 150 since 2014. Newer, more advanced rigs are operating today, and are able to drill more wells faster. Each rig can drill about 18 wells a year compared to just nine in 2009. More than 98 percent of drilling takes place in the Bakken and Three Forks Formations.

The Bakken Formation (the largest continuous oil deposit in the nation) is responsible for more the vast majority North Dakota’s oil production. As of December 2016, preliminary figures indicated there were 13,337 producing wells, with 86 percent of those in the Bakken Formation.

Andeavor’s Mandan refinery began operations in 1954 and is the largest refinery in the state. The refinery has a crude oil processing capacity of 71,000 barrels per day (bpd). One barrel is equal to 42 gallons.

Because of high demand for diesel fuel in the region, in 2013 the Mandan refinery expanded its Distillate Desulfurization Unit capacity by 5,000 barrels of diesel per day to bring the plant’s total diesel hydrotreating capacity to 22,000 bpd.

Andeavor processes Williston Basin crude oil from North Dakota to refine into gasoline, diesel fuel, jet fuel, heavy fuel oils and liquefied petroleum gas. Products are trucked and railed from Mandan and also shipped east via pipeline to eastern North Dakota and Minnesota.

Andeavor Dickinson Refinery (formerly Dakota Prairie Refining), the first greenfield diesel refinery to be built in the U.S. since the late 1970s, came online in May 2015. Located near Dickinson, N.D., the refinery can process more than 20,000 barrels per day of Bakken crude oil into diesel fuel and other petrochemical components. The diesel fuel is marketed within North Dakota, while the other components are shipped to out-of-state customers or to other refineries for further processing. Tesoro purchased the facility in 2016 from WBI Energy (an MDU Resources Group, Inc. subsidiary) and Indiana-based Calumet Specialty Products Partner.

The Bakken shale play was previously undeveloped because conventional drilling methods were not able to access the trapped oil and gas. Technological advances, including horizontal drilling and the process of hydraulic fracturing have made it possible for companies to economically drill for oil in the Bakken Formation.

  • Horizontal drilling allows companies to drill down two miles to the Bakken formation, turn at a 90-degree angle and drill horizontally for as far as four miles. In North Dakota, the typical horizontal leg is two miles.
  • With horizontal drilling, operators are able to drill more wells from a single location, thereby accessing more of the oil and gas resources in the Bakken while using as much as 90 percent less surface area than with traditional vertical drilling.
  • Hydraulic fracturing (also called “fracking”) is a process that pumps a specially blended liquid into a well under high pressure, creating fractures in the underground rock to allow the flow and recovery of oil and natural gas.
  • The fluid used in the hydraulic fracturing process is 98 to 99.5 percent water and sand mixture. Varieties of chemical additives are used, depending on the well conditions, to limit the growth of bacteria, prevent corrosion of well casing, and to increase efficiencies.
  • The state of North Dakota requires disclosure of the additives that companies use via FracFocus.org, a website that provides public access to reported chemicals used in fracking and to provide information on the fracking process.
  • The amount of water needed to hydraulically fracture and maintain production from a well continues to increase. According to the North Dakota Department of Mineral Resources, if 2,000 wells are drilled per year, by 2025 there would be approximately 31,000 Bakken wells. Those wells would require 77 million gallons of water per day for hydraulic fracturing and well maintenance.