SHALE PROJECTION WEBINAR SERIES

Transcription

1 Ward County, North Dakota WESTERN NORTH DAKOTA ENERGY PROJECT SHALE PROJECTION WEBINAR SERIES An Initiative of the Strom Center for Entrepreneurship & Innovation at Dickinson State University

2 ACKNOWLEDGMENTS Our Analysts: 1. Lynn Helms, ND Dept of Mineral Resources 2. Dean Bangsund & Dr. Nancy Hodur, NDSU Our Funders: Bush Foundation Vision West ND US Dept. of HUD Regional Sustainability Planning Grant Our Moderators: Dr. Dick Gardner Don Macke Senior Fellow and Co-Director, RUPRI Center for Rural Entrepreneurship Our Local Host & Coordinator: Deb Nelson, DLN Consulting

3 ROLE OF KEY PLAYERS 1. ND Dept of Mineral Resources Describe scale, duration & pacing of Bakken development consistent with geologic resource Identify dynamic variables, i.e. deal changers 2. NDSU Dept of Agribusiness & Applied Economics Create socio-economic models that build on Helms Distribute regional impacts among counties 3. Center for Rural Entrepreneurship Concerned with community implications & policy, e.g. maximizing benefits, crowding out effects Decision aids for local leaders

4 North Dakota Department of Mineral Resources East Boulevard Ave. - Dept 405 Bismarck, ND (701) (701)

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7 90 NORTH DAKOTA COUNTY OIL PRODUCTION, (millions of barrels) All Others Bottineau Williams McKenzie Stark Bowman Billings

8 WESTERN NORTH DAKOTA WELL PROJECTIONS 1,800 to 3,000 wells/year = 2,000 expected rigs = 12,000 30,000 jobs Another 10,000-15,000 jobs building infrastructure 200 rigs can drill the wells needed to secure leases in 1 year 200 rigs can drill the wells needed to develop spacing units in 18 years 35,000-40,000 more new wells

9 Helms Bakken Development Scenarios Possible Probable Proven

10 Wild Cards Draft BLM Hydraulic Fracturing rule could double federal drilling permit approval time or worse. Draft EPA guidance on diesel fuel in hydraulic fracturing could triple drilling permit approval time or worse. Current administration budget contains tax changes that could reduce drilling capital 35-50% The future looks promising for sustained Bakken/Three Forks development World and U.S. economies continue to struggle. If China joins the downward spiral oil price could fall enough to make some areas uneconomic

11 15,000 13,500 12,000 10,500 9,000 7,500 6,000 4,500 3,000 1,500 MONTHLY OIL PRODUCTION FOR WARD COUNTY WARD wells

12 Ward County Rigs and Jobs Year Rigs Wells

13 120.0 jobs per drilling rig 3.0 wells per gathering contruction job jobs per frac spread 40.0 wells per frac spread per year 1.0 total jobs to support one producing well 12.0 wells per rig per year 0.85 ratio of phase 2 rigs to phase 1 rigs 0.8 ratio of phase 2 well construction jobs to phase secondary jobs per industry job INDUSTRY ESTIMATES OF EMPLOYEES PER WELL Direct Indirect Indirect Production 2.0 Company Rep. 1.4 Construction 0.8 Mud Engineers 0.09 pumper 2.0 Tool Pusher 0.3 Surveyors 0.8 Bit Sales 0.06 company professionals 4.0 Wellsite Geologist 0.4 Crane services 30.4 Water haulers 0.04 workover crews 8.0 Directional Drillers 2.0 Rig hauling 1.2 Fuel Haulers 0.02 roustabouts 4.0 Drillers 4.1 Other trucking 1.6 Mud Haulers 0.28 water disposal 4.0 Derick Hands 0.3 Well logging 3.3 Casing Crew 0.35 oil transportation 12.0 Floor Hands 0.1 DST services 0.8 Cementing 0.01 supply sales 8.0 Mud & cuttings 3.9 Completion Rig 0.8 regulatory 0.11 gas processing 1.1 Perforating 0.2 Biology & Botany 0.01 regulatory 6.6 Frac tank hauling 0.2 Archeology 0.9 Reclamation 8.3 Equip Mfg 1.8 Flowback testing 4.6 Roustabouts Total Well Construction Jobs per rig 1.0 Total Producing Jobs per well Note: 25% of jobs are trucking water Total trucking jobs = 36.6% Recent industry estimates of 60 by year end 2013 Crowding out effect Housing Day care Variable currently 0.7 New Bakken wells currently 3.5 EOR 1.5

14 1,000 Ward County Oil Industry Jobs Jobs Year Prod jobs Gathering jobs Fracing jobs Drilling jobs

15 WARD COUNTY PROJECTED EMPLOYMENT Year Drilling jobs Gathering jobs Fracing jobs Prod jobs Rigs Wells Year Drilling jobs Gathering jobs Fracing jobs Prod jobs Rigs Wells

16 HELMS LIST OF DYNAMIC VARIABLES 3 Expected Ultimate Recovery of oil scenarios 3 Scenarios of secondary employment Additional Factors Not Modeled: Technology Change (Wells/pad; wells/rig/year; fracs/crew/year) Oil collection & water distribution pipelines Increased use & share of natural gas Oil price dynamics Shift towards permanent residents Crowding out of other economic sectors Hundreds of possible scenarios

17 NDSU EMPLOYMENT, HOUSING & POPULATION PROJECTIONS Department of Agribusiness and Applied Economics North Dakota State University Dean Bangsund Research Scientist Dr. Nancy Hodur Research Assistant Professor Ph: Ph:

18 NORTH DAKOTA STATE UNIVERSITY MODEL Consistent with and builds upon Helms model Rapidly changing technology & other variables led NDSU away from trad I/O models and into uncharted territory Projects to 2036 instead of Helms 2050 Consensus, pessimistic, & optimistic scenarios Splits jobs into permanent vs transient Is more accurate at regional level Communities can affect the local distribution of opportunities, impacts, risks, and growth.

19 DYNAMIC ELEMENTS ANNUAL CHANGES OVER Drilling efficiency in ND - 10/wells/rig/yr to 12 by 2032 Employment /drilling rig FTE/rig to 100 by 2016 Oil field service 20% job reduction, trucks to pipelines Temp vs Permanent employee ratio Secondary employment from permanent employees more than doubles from 0.5 jobs per employee Base Employment constrained in Williston & Dickinson regions to show some crowding out effect Housing Mix change in type over time, more apts County Housing Share changes in some counties with trends

20 ,000 50,000 40,000 30,000 20,000 10,000 0 North Dakota Total Direct Employment Petroleum Sector Consensus Scenario Temporary Direct Permanent Direct

21 60,000 50,000 40,000 30,000 20,000 10,000 ND Petroleum Sector Employment Consensus Scenario 0 Drilling & Fracing Oil Field Service Gathering Total

22 GOLDEN VALLEY BOWMAN DIVIDE State Planning Region 1 MCKENZIE SLOPE BILLINGS WILLIAMS State Planning Region 8 DUNN ADAMS BURKE MOUNTRAIL STARK HETTINGER WARD State State Williston Region Minot Region RENVILLE BOTTINEAU Planning Region Region 2 2 MCHENRY PIERCE Dickinson Region Major trade centers

23 0.6 Petroleum Employment as % of Total Employment Dickinson Region Williston Region Minot Region

24 70,000 Minot Region Composition of Employment Consensus Scenario 60,000 50,000 40,000 30,000 Secondary Added Total Direct Petroleum Other Employment 20,000 10,000 0

25 65,000 Minot Region Permanent Housing Units 60,000 55,000 50,000 Pessimstic Consensus Optimistic 45,000 40,000

26 ,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Minot Region Consensus Scenario Demand: Housing Units Total (service) Housing Units Permanent (census) Housing Units

27 140,000 Minot Region Permanent (Census) Population 130, , , ,000 Pessimstic Consensus Optimistic 90,000 80,000

28 40,000 38,000 36,000 34,000 32,000 30,000 28,000 26,000 24,000 22,000 20,000 Ward County Permanent Housing 40,000 38,000 36,000 34,000 32,000 30,000 28,000 26,000 24,000 22,000 20,000 Pessimstic Consensus Optimistic Ward County Consensus Scenario Service Permanent

29 90,000 Ward County Permanent Population 85,000 80,000 75,000 70,000 65,000 60,000 Pessimstic Consensus Optimistic 55,000 50,000 90,000 85,000 80,000 75,000 70,000 65,000 60,000 55,000 50,000 Ward County Consensus Scenario Service Population Permanent Population

30 WARD COUNTY PROJECTIONS (CONSENSUS) Permanent Housing % Ave Annual Growth Permanent Population % Ave Annual Growth 28,020 33,800 38, % 0.8% 64,820 76,750 86, % 0.8%

31 CONCLUSIONS This boom is much longer-lived than 80s boom Not last word; instead first comprehensive projection of employment, housing, and pop Best available data & best local experts Scenario of likely future; not precise prediction Our job to give you input You have the ability to affect the amount of growth that comes to your community. You decide about your community s vision for itself, and make decisions on that basis.

32 WHAT IF YOU ARE WRONG? If you are too cautious: Your community will under-invest in public infrastructure and private development, You will fall short of maximizing the number of workers, new residents, and economic activity. A cautious region will have short-term crowding out of secondary spending Long-term w/o enough temp housing, oil workers may crowd out others and other sectors will lose If you are too aggressive : Over-investment in public infrastructure and private investments >> bankruptcy and higher taxes for residents left holding the bag

33 HOW CAN A COMMUNITY GET ITS SHARE? Agree on community vision & goals Conduct infrastructure planning & implement Use land use planning to encourage, condition, and site housing & community development Plan/require amenities that improve quality of life, e.g. parks, trails, rec facilities, comm. ctr. Regardless of vision, plan for increased traffic flows, truck by-passes, etc.

34 THOUGHTS? WHAT ELSE? We ve outlined a likely scenario, and flanked it with optimistic and pessimistic alternatives to offer you a plausible range of outcomes in an uncertain & dynamic world. 1. What other questions need to be answered? 2. Are there scenarios you d like to see? 3. Are there other subjects or community impacts for a webinar of lessons learned in other boomtowns?