Following Crude Prices

The December print issue explores the U.S. crude oil export ban, crude price complexities and the 2014 success stories.
By Luke Geiver | December 12, 2014

What happens in the Bakken does not stay in the Bakken. Unexpectedly low crude prices have highlighted the link between unconventional oil and gas production in shale plays, such as the Bakken and Eagle Ford, and the global crude marketplace. No entity––be they exploration or production firms developing Divide County acreage or a family-owned trucking firm founded in the late 2000s––can now expect to perform and move their bottom line in a bubble that excludes world market forces.

When the Organization of Petroleum Exporting Countries meets in November during the Thanksgiving holiday to determine its future production plans, those connected to the Williston Basin now need to take notice. At this year’s OPEC meeting, the impact of U.S.-produced crude sourced from unconventional plays was a major topic––so large, in fact, that it influenced OPEC’s decision to shy away from cutting production. For OPEC, the threat of losing market share to U.S.-unconventional oil producers was, in part, too great to ignore the budgeting shortfalls that could affect the ability of OPEC members to maintain their fiscal well-being. The decision has thus kept the global crude supply greater than the demand. The Bakken play is now at an unprecedented juncture. Crude prices and the global supply and demand curve have many speculating what the impact of oil at $60 per barrel or lower will mean.

After exhaustive research, calls and talks with industry players and outside analysts, we believe the answer is simple: no one knows. What we do know is that low crude prices could have an impact on the Bakken play, but in a very complex way. Our team will continue tracking the evolving story of crude prices and the Bakken in the year ahead, and we worked to explain it in “The Complexities of Crude Prices” on page 40.

Before crude prices were ever an issue, many businesses and legislators were focused on lifting the U.S.-imposed crude oil export ban. Those favoring lifting the ban believe it will allow U.S. producers to continue the pace of production even as the U.S. light oil refining capacity approaches capacity. Opponents of lifting the ban—a group of refiners—believe it will increase the price of fuel for U.S. consumers. To put a face on a story engulfed by policy, we spoke with Dan Eberhart, CEO of Canary LLC, the largest U.S.-based independent wellhead provider. Eberhart bet big on the Bakken in 2008 and has since reaped the rewards, transforming a Watford City, North Dakota-based oil services firm into a nationally recognized, multiplay firm with roughly 500 employees (Eberhart started with 12). Eberhart’s personal success story is outdone only by his efforts with the crude oil export ban. As you’ll see in, “Focused On Exports,” on page 26, Eberhart is in the midst of reshaping the story on the export ban.

The coming year will be defined, at least in part, by crude prices and the export ban. Flaring, crude-by-rail and community funding will also continue to be dominant themes. But, as Tessa Sandstrom reminded us, in her page-14 North Dakota Petroleum Council column, 2014 saw some incredible successes. And if the year ahead can mimic the one we are leaving behind, we will all want what happens in the Bakken to be known everywhere outside the Bakken.

Luke Geiver
The Bakken magazine