Northern Border

Bakken associated gas production volume, after falling to its lowest levels in three years in early May and remaining depressed through June, has surged by 500 MMcf/d, or about 45%, in the past month and a half to 1.7 Bcf/d. However, the gains have occurred in the absence of a meaningful change in rig counts or well completion activity, which remains sluggish. Similar to the Permian, the Bakken production recovery has been almost entirely driven by existing wells returning to service after being shut in earlier this year in response to the oil price collapse. With little in the way of new drilling and completion activity, how long will it be before natural declines of existing wells begin to take a toll on Bakken output? Today, we examine prospects for continued strength in Bakken gas production volumes.

The collapse in crude oil prices that resulted from the Saudi-Russian price war in March — made only worse by the oil demand-depressing effects of COVID-19-related shelter-in-place orders — has begun to exact a toll on U.S. crude supplies. The Bakken, America’s #3 oil-producing basin, is a prime example of how quickly the price downturn has begun to negatively affect oil supplies as uneconomic wells there have been shut in and oil-focused drilling has ground to a near standstill. The spillover effects on the Bakken’s associated gas supplies have been just as dramatic with a sharp reduction seen since April as oil well shut-ins began to accelerate. The decline in these natural gas and NGL supplies to date provides a stark example of how quickly gas balances may be shifting in the region and may also be creating an opening for long-suffering Canadian gas exports. In today’s blog, we take a closer look at how Bakken oil supply declines are beginning to impact its gas supplies.

The rapid increase of natural gas processing capacity in the Bakken in recent months has helped to ease producers’ growing pains, clearing the way for more crude oil and associated gas to be produced there and more Bakken gas to flow into the Midwest. That good news is countered, however, by bad news for Western Canadian gas producers, whose long-standing pipeline takeaway constraints only worsen as more Bakken gas flows into the Northern Border pipeline that cuts through North Dakota on its way to Chicago and other downstream markets. Today, we continue our series on the fight between Bakken and Western Canadian producers for space on Northern Border with a look at incremental flows into that key pipe.

Oil production from the North Dakota Bakken shale reached 639 Mb/d in May 2012. Associated natural gas production was 651 MMcf/d. So far oil production has been the main focus for Bakken producers. Gas production has been an afterthought. So much so that 1/3rd of it is flared.  A new BENTEK study for North Dakota energy policymakers (we provide a link to the study) indicates natural gas volumes in the region will increase substantially in the coming years. The obvious market for this gas is to displace Canadian gas flowing through the Bakken to get to the Midwest. Today we look at the coming battle for pipeline capacity between producers in the Bakken and those in Canada.