FARGO — Production in North Dakota’s Oil Patch has slumped by an estimated 175,000 barrels daily — down from 1.4 million barrels daily — from the “double whammy” of plunging demand from the coronavirus crisis and a glut caused by a price war.
The producers met via video conference on Tuesday, April 7, with Sen. John Hoeven, R-N.D., and Steven Winberg, an assistant secretary of energy, to talk about policies that can help the petroleum industry weather the economic storm.
The number of drilling rigs operating in the Oil Patch has dropped 35%, from 53 to 35, with an optimistic forecast that the rig count could hold between 25 to 29 as producers struggle with low prices and demand, said Ron Ness, president of the North Dakota Petroleum Council.
“We’ve had downturns in the past, but we’ve always had demand,” he said.
Operators will need access to capital — $120 million, by Ness’ estimate — to maintain oil production, a lifeline that is difficult to sustain with low prices and demand, Ness said.
Hoeven said oil producers have access to low-interest loans through the relief legislation that Congress has passed. The senator said he continues to push for an end to the price war between Saudi Arabia, the leading member of the Organization of Petroleum Exporting Countries, and Russia.
The senator said he’s also pushing Congress to provide money to purchase oil for the Strategic Petroleum Reserve, which has the capacity to accept 77 million barrels of oil.
As it stands, oil companies can store oil in the reserve tanks, but the government does not have money to purchase the oil. Storage is still attractive because it gives the opportunity to sell when prices rebound.
“Producers are in a cash-flow crunch,” Winberg said. “We understand that.” He expects oil could return to $50 to $60 per barrel in 18 to 24 months.
Energy infrastructure, including pipelines, should be part of any infrastructure bill, which has bipartisan support in Congress, Hoeven said.
There is no good estimate yet of the number of jobs that have been lost in the Oil Patch. Ness said the Williston area appears to have lost about 850 oil-related jobs, but said that estimate is sketchy. David Flynn, an economics professor at the University of North Dakota, said it appears about 1,400 jobs have been lost so far in the oil and mining sector, about 7% of the state’s jobless claims.