I know there is some remuneration for contributing to SeekingAlpha, but it seems in this case, whatever it is, it is not enough. This is an incredible article.
It is so full of data and information, it makes no sense for me to do my usual highlighting. Just go to the linked article and spend some time there. [I did add some comments below.]
For newbies: remember, the Bakken is not considered a "gassy field." The Bakken is an "oily" field. In fact, when I first started blogging about the Bakken I had no plans to talk about natural gas, partly because I did not understand natural gas, but more importantly, because economic value of natural gas in the Bakken was felt to be about 3% of total oil & gas economic value. Incredible, huh? Natural gas in the Bakken with three percent of total oil & gas economic value and natural gas in the Bakken has become a huge story.
From the beginning I gave a lot of credit to ONEOK for pioneering natural gas industry in the Bakken. My interest in natural gas in the Bakken all started when I accidentally drove by a ONEOK natural gas gathering and process plant under construction northwest of Williston and not knowing what it was. Whiting has also become a big name in natural gas in the Bakken. And then this week, it was announced that Crescent Point Energy was going to align all its wells with ONEOK natural gas pipelines in Divide County, north of Williston. Same with Whiting in its Red River wells in the southwest part of the Bakken, putting in natural gas lines before completing those wells.
Great article. A huge "thank you" to Don for sending me this article. I'm not sure how I missed it earlier this week.
Some Takeaways From the Article
- It is super-rich in NGLs and is characterized by perhaps the highest heat content among North American unconventional plays;
- It is growing fast; and,
- As a by-product of drilling for oil, it is essentially "costless."
From the article:
With crude production from the Bakken expected to grow for over a decade, associated gas output should also rise to much higher levels, possibly as high as 2.5 Bcfe/d of raw gas at the wellhead. This would position the Bakken as a very significant source of NGL supply in North America and will create a continued growth opportunity for Midstream infrastructure providers focused on the Bakken.This, perhaps, is the most important part of the linked article:
Not all E&P operators will benefit equally from the processing infrastructure build-out. Given that the Williston Basin remains gas infrastructure short, some operators may find themselves without processing agreements and will have to wait until sufficient capacity is finally available. Production volume and acreage/well concentration are particularly important to an operator's ability to secure gathering & processing agreements on reasonable terms.
The distribution of economic benefit is another important issue. Operators who control processing and gathering infrastructure will obviously be in a better position to receive the highest value for their product. Hess Corp. and Whiting Petroleum are two examples of large operators taking significant control of infrastructure development in their operating areas. Hess' midstream solution is the most comprehensive and integrated: it includes a large-scale processing and fractionation facility, a dedicated ethane pipeline (Vantage pipeline), and an anchor shipper position on a new lateral interconnection to an interstate gas pipeline.But, good news, short term:
In summary, gas takeaway capacity from the Williston Basin does not appear to have structural constraints, at least in the near term, and all the volumes produced by processing plants should find transportation solutions, regional or interstate. While Bakken gas may trade at a Canadian-type differential to Nymex, the basis should stay reasonably narrow (by the historical standards for AECO basis).But there is much more to the pipeline story, longer term. Go to the link for more. Be sure to read "Oil Finder"'s comment near the bottom of the comments. He highlights one of the problems publicly traded companies have with quarterly need to please investors.