Every year, Hart Energy puts on the DUG Bakken-Niobrara conference in downtown Denver, where industry officials talk about economics, production and innovation in the Bakken region in North Dakota and the Niobrara region in the Denver-Julesburg Basin.
The conference, held March 31-April 2 at the Colorado Convention Center, focused this year on companies finding ways to continue innovation and operation in the bust side of the oilfield lifecyle. Crude prices reached a high over $100 a barrel last summer but have sunk more than 60 percent in recent months, signaling companies’ needs to downsize and control costs. That has meant job losses and price cuts across the board.
Most conference speakers discussed the ways that companies can weather the cycle.
The following are some highlights of discussions pertaining to the Niobrara:
“You producers have proven to the world that the U.S. has enough (resources). It has meant a renaissance in terms of investments and opportunities to respond to this shale revolution. We’re investing now at a pace that we haven’t seen since the last infrastructure build-out in the ’70s.
“In late 2012, I was with BNSF (Burlington Northern Santa Fe) executives talking about our own crude by rail movements. I told them crude by rail is a flash in the pan because it’s so inefficient and costly. … Clearly, crude by rail has become an important element particularly in the Bakken. For my own company, a very important part of our strategy.”
— Diana Santos, vice president of Phillips 66 Pipeline, which owns DCP Midstream.
“With the U.S. supply growth we’ve had, we also have a real imbalance of quality. There’s so much light oil in the U.S. that really, we’re very rapidly approaching the full capacity of the U.S. refinery system to efficiently operate using that light oil. Much more effective would be to ship some of that oil at a premium into the international market, and continuing to import more sulfurous oil. … Some $85 billion has been spent in reconfiguring refineries in the last decade. If one didn’t have access to international markets, there will have to be a price to idle that capacity, and that translates to bigger discounts. … We’re rapidly approaching the reality of that.
There’s quite a bit of persuasion (in Congress) going on about the benefits, if in fact, we lift the ban (on exporting U.S. crude). There’s a trade deficit benefit because of the light tight oil, that can go to markets that can pay full value, as opposed to what happens when we reach a point where you’ve reached capacity to run light, tight oil in the U.S. system. Now you go to the refineries … the sophisticated equipment you would normally use to create gas, diesel and aviation fuel now has to be sidelined. To do that, I’m going to give you a bigger discount.
“In the absence of action, we’re likely to reach that limit sometime this year, the third quarter potentially, and we might be under conditions where we’re looking at even lower prices than today. At some level that becomes a lose-lose. The government loses revenue, job loss picks up and … (and the ongoing benefits of a lower trade deficit will go away). If you don’t do something here pretty soon, it will go the other way.”
— Tom Petrie, chairman of Petrie Partners in Denver.
“Basically where we’re drilling is an eastern extension to the Wattenberg, basically out there within the Colorado mineral belt … where we have about 132,000 net acres under lease, well away from population centers, in an area where predominantly all our acreage is on three fairly large ranches. And it’s an area where the Niobrara is in the oil expulsion window, as opposed to back toward the Wattenberg, where it’s predominantly gas.
“… Although I will say it’s good, rich, gas out here, we already built our own gas plant out there … . We’re masters of own fate up there. We’re not waiting for anyone to hook us up.
“As we look at the infrastructure, you really couldn’t in my opinion, even if you could plan it with Mother Nature, where to place a brand new field, you couldn’t have picked a better spot than Redtail. It’s bounded on the north by two large interstate pipelines … To the east of us, there’s the Pony Express oil pipeline and as a consequence, we committed early to that line and we’re enjoying a low differential in comparison to the current market.”
— James Volker, CEO and chairman of Whiting Petroleum Corp., on the company’s assets in northeastern Colorado, commonly referred to as the Redtail area.
“What’s really important, when we go forward and look at what reservoirs look like, these years with low oil prices will matter. There’s a lot of job losses here. When you send everyone home, you just can’t bring them back overnight.”
— Trisha Curtis, director, upstream and midstream research, Energy Policy Research Foundation Inc.
“We have a bit of a different view on oil prices, long term strip is mid-$60s. The long-term research consensus is $75 plus; we at TPH think we’ll return to $90-oil. Fingers crossed on that one.
“We believe with massive rig reductions, supply will come back into balance with demand near the fourth quarter of this year. If you assume a modest 1 percent growth in demand, we as a global economy have to increase supply, and the U.S. is the only area with the demonstrated ability to rapidly increase supply.”
— Jeff Knupp, director of investment banking for Tudor, Pickering, Holt & Co., in Houston, Texas
“Over and over again, they (environmentalists) have tried to suppress fossil fuels production, but ingenuity and imagination and innovation from the fossil fuel industry has defeated them and deflected their goals. They have been frustrated over and over again by your ingenuity and imagination.”
— John Fund, political journalist and economist, and DUG Bakken keynote speaker.
This article was written by Sharon Dunn from Greeley Tribune, Colo. and was legally licensed through the NewsCred publisher network.