It's Gettin' Hot in Here - Northern Border BTU Content

In North Dakota’s Bakken production region, crude oil is king. The light, sweet crude produced there is attractive to buyers in the Midwest and Gulf Coast and is the primary driver of producer economics in the basin. And when the crude is produced, it comes along with a healthy dose of NGL-rich associated natural gas. But while those are valuable products in their own right, providing economic uplift when sold, it’s a double-edged sword. Natural gas and NGL volumes are increasing rapidly and will soon test the limits of takeaway capacity, with the potential to disrupt not only those commodities but also the crude production with which they’re associated. In today’s RBN blog, we discuss three potential limitations faced by Bakken producers: natural gas pipeline capacity, NGL pipeline capacity and, at the fulcrum of those two, the Btu heat content of the gas being piped out of the basin. 

The battle between Bakken and Western Canadian natural gas supplies for the Chicago market seems to be advancing toward a final showdown of sorts. Associated gas production from the crude-focused Bakken has been rising sharply, but capacity on the Bakken’s two gas takeaway pipelines — Northern Border and Alliance, also utilized by Western Canadian Sedimentary Basin (WCSB) supplies — has been maxed out for a few years now. The result is that Bakken gas is increasingly encroaching on — and pushing back — imports from the WCSB. Bakken gas flows already overtook Canadian gas receipts on Northern Border a year ago. Since then, the gas-on-gas competition and the resulting pipeline constraints have escalated, and things are likely to get worse. Today, we break down the forces at play in the competition for market access.

Much as production growth in the Permian required the development of new pipeline capacity to take away crude oil, natural gas and NGLs, increasing activity in the Williston Basin has spurred the need for incremental capacity to move all three of the energy commodities out of western North Dakota and eastern Montana. For NGLs, the recent start-up of ONEOK’s Elk Creek Pipeline has been the answer to producers’ prayers — not just in the Williston Basin (home of the Bakken formation), but also in the Rockies’ Powder River and the Denver-Julesburg (D-J) basins, through which the new, 240-Mb/d pipeline passes on its way to Bushton, KS. Elk Creek’s timing couldn’t have been better: it came online just as a number of new gas processing plants entered commercial service in the Williston Basin, and just in advance of possible Btu restrictions on the all-important Northern Border gas pipeline that may force cutbacks in ethane rejection. Today, we explain why the Elk Creek NGL Pipeline helps resolve a number of challenges Bakken producers have been facing.