Bakken the High Life Again - An Update on Natural Gas Flaring Challenges in North Dakota

Crude oil and natural gas production in the Bakken are at record highs, and with the surge in production has come infrastructure constraints and higher rates of flared gas, renewing concerns about possible production shut-ins. As gas production volumes exceeded gas processing capacity, the flaring rate in April 2018 rose to 15% of total monthly volumes –– precisely the current limit set by North Dakota’s gas capture plan and three percentage points above the 12% cap due to kick in this November. Rig counts, producers’ drilling plans and $70/bbl crude oil prices all point to further production growth, which means that without additional processing capacity — or a change in the gas-capture policy — it will be increasingly difficult for producers and processors to comply. Today, we look at the latest developments in Bakken gas production, gas-related infrastructure and the gas capture policy.

As we discussed last fall in There’s a Fire in the Night, the Bakken oil and gas industry has been struggling with gas capture and flaring issues for the better part of the last decade. There was a time, going back to 2011, when as much as 37% of produced gas was being flared as oil and associated gas production was on a tear and gas gathering and processing were struggling to keep up. That prompted the North Dakota Industrial Commission (NDIC) to require exploration and production companies (E&Ps) to file a “gas capture plan” (GCP) with their drilling permits and put in place flaring limits.

The new rules limit flaring to one year after first production from a well, after which time producers have to do one of the following:  connect the well to a gas gathering pipeline, cap it, or link it to an electrical generator or a compression or liquefaction system that consumes at least 75% of the gas onsite. The NDIC also set targets for reducing the share of produced gas that is burned off statewide: flaring no more than 26% of total gas production by November 2014, 23% by January 2015, 20% by April 2016, 15% by November 2016, 12% by November 2018 and 9% by November 2020.

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