Bakken and Western Canadian Producers Wrangle for Gas Takeaway Capacity; Paradox Basin Surprise? -- August 14, 2017

Active rigs:

$48.48↓	8/14/2017	08/14/2016	08/14/2015	08/14/2014	08/14/2013
Active Rigs	57	33	74	194	184

RBN Energy: Bakken and western Canadian producers wrangle for gas takeaway capacity.

Associated natural gas production from North Dakota’s oil-focused Bakken Shale is rising as rigs are being added in the region. Bakken gas output reached a record 1.18 Bcf/d this past May.

The incremental gas production in the area is intensifying competition with imports from the already-beleaguered Western Canadian Sedimentary Basin (WCSB), which share the same pipeline capacity and target the same Midwest demand markets. The trend also is prompting calls for more pipeline capacity out of the Bakken. How much more capacity is needed and by when? Today, we look at existing natural gas takeaway capacity and flows out of the Bakken.

We first wrote about rising Bakken gas production and the impending battle with Canadian gas for pipeline takeaway capacity in a July 2012 blog.

At the time, crude oil was trading at upwards of $80/bbl. Oil production from North Dakota’s Bakken Shale had just climbed above 600 Mb/d. Associated gas volumes, including the natural gas liquids content, were just barely approaching 700 MMcf/d, and nearly 40% of that gas was being flared because of midstream capacity constraints, allowing little more than 400 MMcf/d of dry gas to hit the pipelines. But at $80/bbl, oil production was slated to climb rapidly, and with it came increasing volumes of associated gas.

By late 2014, Bakken oil output had doubled to 1.2 MMb/d, dry gas volumes were approaching 900 MMcf/d, North Dakota implemented new restrictions on gas flaring to be phased in over a few years and consequently the market was becoming concerned about pipeline takeaway capacity. But about that time, the 2014 oil-price collapse took a severe toll on rig counts, Bakken crude output declined slowing the growth in associated gas volumes, and for a little while concerns about the possibility of insufficient gas takeaway capacity were deferred — at least until now.