– Oil executives in North Dakota, a center of the U.S. shale revolution, say OPEC made a questionable bet when it decided on Friday to stick with a policy that aims to push higher cost American producers out of the market by keeping output high.
Here, in the top U.S. oil state after Texas, oil companies have slashed costs over the last seven months to reach fighting weight — one that will allow them to profit despite the more-than 40 percent drop in prices over the past year and solidify the new American role as the world’s swing supplier.
The policy OPEC first adopted in November has brought stress, but not catastrophe. Oil companies say they have recalibrated their operations to survive even if prices stay lower for a long while.
“High commodity prices hide a lot of inefficiencies in the system,” said Tommy Nusz, chief executive of Oasis Petroleum Inc., which pumps about 58,000 barrels per day in North Dakota. “Most companies will come out of this cycle stronger.”
Indeed, while the number of North Dakota drilling rigs has plunged sharply so far this year — the count sat at 81 on Friday, down from 146 in early February — the state’s oil production has proved resilient.
Output fell slightly in January and February, but jumped in March, highlighting the potential of shale wells to ramp up or down quickly, regardless of the cartel’s actions.
“OPEC still is our main competition,” Lynn Helms, head of North Dakota’s Department of Mineral Resources and the state oil industry’s main regulator and promoter, said in an interview.
“But what you’re seeing now is the Bakken becoming the swing producer, something that has happened relatively quickly because of efficiencies in drilling and completion technology.”
Saudi Arabia, Venezuela and the 10 other OPEC members have, for their part, seen their strategy of the past half year as successful. Saudi Arabian oil minister Ali al-Naimi and others described Friday’s meeting as “amicable,” and showed little sign of wanting to change an approach that has dampened the U.S. shale boom.