KLJ Reports on Positive Effects from Decrease in Oil Prices

A decrease in crude oil prices that caused production to slow has resulted in some positive effects for the area, KLJ’s CEO reported to the Dickinson City Commission during a special meeting Monday afternoon.

Niles Hushka said there has been significant innovation in the field since the drop in crude oil prices.  “The play is all about optimizing production in existing facilities or how do you make yields come out,” he said.

He used an example where Whiting Petroleum Corp. has wells in the region that are yielding 7,000 barrels of energy equivalent.  “Those initial productions are twice as much as we ever would have expected,” he said.

This time last year, he said, wells that were yielding 3,000-3,500 were considered “very good.” But innovation has occurred since then, which suggest re-fracking may be feasible.  While industries have reported a decrease in business due to the oil drilling and production slowdown, Hushka said the unemployment rate in the area is still relatively low.  He said many of the employees were laid off were from surrounding regions, and therefore didn’t have a drastic effect on residents of Dickinson.

Many companies opted to freeze salaries but didn’t lay employees off completely.  Hushka said a surge bill from the state of North Dakota also helped provide construction jobs for those who were looking for work.  “It kicked in at just the right time,” Hushka said.

Although marginally, studies have also shown the slowdown has driven down the cost of a two-bedroom, one-bathroom apartment in oil-hub cities.  The cost of living is still higher than non-oil producing regions in the state, but that price is slowly decreasing.

Hushka said that based off of studies, he suspects oil production will begin again shortly, once crude oil prices climb to $65-$70 a barrel.  He said there is currently a hydraulic fracturing backlog, with an estimated 800-1,000 wells that are ready to be fracked but won’t be drilled until a barrel of oil rises above $65-$70.  “Once that happens, it is going to make for extremely high levels of activity,” Niles said.

The state currently has more than 13,000 oil-producing wells. Niles said with new technology, production could increase by 20 to 25 percent “relatively quickly.”  However, this could pose an issue because there isn’t enough frac sand or frac crews due to recent layoffs.

He said once the $65-$70 per barrel benchmark is hit, man camps will fill up, hotels will be full and airline boardings will rise.

“We will see some very frantic action across the board,” he said, adding he suspects that could happen soon depending on several working parts including a supply of oil that Saudi Arabia currently has in store.

Kessler is a reporter at The Press. Contact her at 701-456-1208.