Since 2010, North Dakota’s oil industry has boomed, putting McKenzie on the map as the fastest-growing county in the U.S. Following a year and a half of pandemic, the state’s oil industry is bouncing back, with the potential to expand its energy output over the next decade. Even before Covid-19 hit, sending the world’s oil industry into a tailspin, oil prices in McKenzie soared to $130 a barrel before crashing to less than $40 a barrel. Crude oil production in the country increased by 1,800 percent between 2010 and 2014, as discoveries from the 1950s could finally be exploited thanks to new fracking technologies, sending workers flocking to the region and doubling the local population over a decade.
After a decade of growth, the government estimates that tens of billions of barrels could still be sitting in the ground waiting to be tapped. A once unknown town, Watford City is now well-known and popular among young families looking to make good money of the state’s booming oil industry. And the infrastructure, such as schools and housing has grown around McKenzie’s energy sector.
North Dakota has experienced significant development in recent years, largely due to the advancement of the oil industry in the west of the state. As well as basic local level infrastructure, the state has also seen the construction of hotels, restaurants, and a new airport, with state revenues of $12 billion coming directly from oil. The state’s oil industry also supports around 35,000 direct workers and over 65,000 indirect jobs.
As the second-largest oil-producing state in the U.S., North Dakota shifts 1.2 million barrels of oil per day to the U.S. market through North and South Dakota, Iowa and Illinois, in its Dakota Access Pipeline.
Despite this rapid growth and huge oil reserves, North Dakota did not come out of the 2020 pandemic unscathed. Estimates suggest that around 10,000 people lost their jobs in the state’s biggest oil-producing counties last year, with unemployment across oil districts soaring to 7.9 percent by the end of the year from 1.8 percent in 2019.
The federal stimulus provided at the height of Covid-19, aimed at the energy sector, encouraged workers back to the fields as tens of millions of dollars supported jobs. Workers that were no longer needed in oil production, due to the drop in demand, started plugging abandoned wells and carrying out exploration for new wells. This allowed the state to keep many of its young, motivated oil workers long enough for the industry to bounce back as restrictions eased and vaccine levels increased.
Oil prices have been rising gradually in recent months, reaching over $60 a barrel earlier in the year, oil producers across the region were encouraged to pick up the pace of operations. Several firms maintained their oil production levels in the first two quarters of 2021 and continued work on drilling new wells to ensure output remained steady and could be boosted in line with demand.
Following recent moves from President Biden to restrict North American oil production, halting any new federal leases for oil and gas, as well as canceling key oil transportation projects such as the Keystone XL pipeline, oil firms, and workers across North Dakota worry for the future of their industry. At present, it seems the huge Dakota Access Pipeline is not under threat, but producers need to be prepared for the changes that the surge in alternative energy production and the drive for net-zero carbon emissions could bring.
North Dakota’s oil production appears stable at present, with an average output of 1.1. million bpd in May and June. While it has not yet reached its pre-pandemic production peak of 1.5 bpd, renewed interest in the state’s energy leaves huge potential for untapped reserves should Biden decide to support U.S. oil, as demand and prices continue to rise.
The state’s natural gas production is much the same, with output standing at 2.9 billion cubic feet of gas per day in June. However, if demand for gas continues to grow, new jobs could be seen over the next couple of years for the construction of new pipelines and processing facilities as the U.S. strives to reduce its gas flaring.
State Mineral Resources Director Lynn Helms explains, “I would have to characterize the Bakken at this point as a sleeping giant. The COVID pandemic kind of put the industry to sleep, and it’s struggling somewhat to wake up.”
Recent hope for the state’s energy sector came in August when ADM and Marathon Petroleum formed a joint venture to use North Dakota soybean oil in renewable diesel production.
“Today’s announcement is welcome news for North Dakota’s soybean producers and refinery employees in Dickinson. The ADM and Marathon partnership highlights the ingenuity of our agriculture and energy producers while providing more investment and jobs for workers. I applaud this collaboration and look forward to assisting in this venture however possible.” stated U.S. Senator Kevin Cramer of the move.
This shows how some of the state’s key economic sectors could be working together in the development of innovative energy projects over the coming years, as well as continuing to exploit the region’s strong oil reserves.
As North Dakota keeps its oil industry ticking over, largely untapped reserves and the potential to expand the state’s energy industry into renewables give hope for the future of oil and gas in this region.
By Felicity Bradstock for Oilprice.com
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