Bakken crude back on infrastructure treadmill

That’s putting the Bakken back onto a familiar treadmill, one that’s similar to what’s happening in the Permian right now, and similar to what’s happened in the Bakken’s own not so distant past. The latest infrastructure crunch could result in significant dampening of future Bakken production and prices if it is not dealt with swiftly, according to analyst reports.

Stratus Advisors, in its latest weekly analysis, notes that North Dakota’s August gas production alone added 260 million cubic feet per day of gas to daily production totals. By comparison, one world-class gas processing plant would handle 200 million cubic feet per day.

Annualized on a 12-month basis, that kind of growth would require 16 new plants in a year’s time. So far, seven new gas plants have been proposed, adding a little more than one billion cubic feet per day in processing capacity, along with incremental increases of about 40 million cubic feet per day.

The gas production doesn’t come alone, however. There are also NGLs associated with that, which require their own infrastructure. Using a conservative estimate of 6 gallons of NGLs per thousand cubic feet of gas, that would suggest about 40,000 new barrels of NGLs per plant that will also need takeaway and processing infrastructure.

Bakken gas can be as low as 2 NGLs per thousand, but is more often up to 10, making 6 GPM a conservative estimate.

“There’s a treadmill of growth becoming ever more important to look at, not just for oil, but also for gas and NGLs,” said Greg Haas, midstream analyst for Integrated Oil and Gas Research for Stratas. “It’s like a treadmill with three wheels that all have to keep going in the same direction.”

Oil wheels close to sticking

The state has 1.37 million barrels per day in pipeline capacity for crude oil takeaway, but its oil production just tagged 1.36 million barrels per day in October.

Right now the state is taking around 300,000 barrels per day by rail, which has helped leave some room on pipelines, but projections by the state’s pipeline authority, Justin Kringstad, have shown oil production exceeding current pipeline capacity by as much as 700,000 barrels per day in the next 10 to 15 years.

Energy Transfer Partners recently proposed expanding the capacity of Dakota Access to 570,000 from 520,000, an additional 50,000 barrels per day of takeaway.

And Phillips 66 and Bridger Pipeline have announced the Liberty Pipeline project, which could take up to 350,000 barrels per day to Texas.

Liberty would become the state’s second largest line, if built. It would likely use some existing pipelines. The aim is to have the new line operational by 2020.

There is an open season right now to gauge interest in the Liberty line. The outcome will ultimately determine both the size and viability of the project, as well as its exact route.

Keystone XL, meanwhile, was to have carried up to 100,000 barrels per day of Bakken crude at an on ramp in Baker, Montana. That is now on indefinite hold, however, after a judge ruled that certain studies for the line must be revisited to consider new information since the company’s initial application.

Those three projects together would add 500,000 in new takeaway capacity — a substantial rise, but still about 200,000 below projected needs.

NGL wheel spinning

NGL takeaway has been around 400,000 barrels per day, with about 40,000 to 60,000 of that going by truck or rail.

Takeaway capacity for y-grade liquids got a substantial boost with the announcement earlier this year by ONEOK that they would build the Elk Creek pipeline, to take up to 240,000 new barrels per day of unfractionated NGLs to a processing facility in Kansas. The line could be expanded to 400,000 barrels per day, if demand warrants it.

That line totals six gas plants worth of takeaway for Bakken NGLs initially, using the conservative 6 gallons per thousand cubic feet of gas, and four more on expansion, or 10 total.

Kringstad’s figures for NGL production projects that the state’s NGL production will more than double to between 800,000 and 1 million barrels per day by 2030.

Proposed infrastructure appears to meet the low side of that projection. More could be needed if actual production lands on the high side.

Gas a sticking point

North Dakota’s booming gas production has already become a sticking point in the big picture for oil production. The state hit a record 2.532 billion cubic feet per day in October, according to the Division of Oil and Gas.

Industry captured 83 percent of that, missing its 85 percent capture target for the sixth month in a row, and flaring 431 million cubic feet into the air.

The situation has prompted some companies to voluntarily restrict production, according to Lynn Helms, Director of Mineral Resources and the Oil and Gas Division. He believes, based on his conversations with oil company officials, that oil production has been curtailed by as much as 50,000 barrels per day.

The state’s gas crunch is likely to continue, as its capture target was to rise to 88 percent this month. Helms had advised the North Dakota Industrial Commission to delay adoption of the higher percentage, but they decided to wait and see the outcome of new federal rules that will let the MHA nation determine capture regulations on Fort Berthold.

Seven new gas plants totalling 1.47 billion cubic feet of added gas processing capacity have so far been announced, which will greatly help alleviate the situation, but most of them won’t be online until 2020.

The Oasis Wild Basin plant is the only one of the seven that may be operating before the year’s end. Its construction is complete, but it is still in the commissioning phase. It will add 200 million in processing capacity once online.

Hess-Targa’s Little Missouri 4 is likely to come online in 2019, with another 200 million in capacity.

Three companies have also proposed incremental increases totalling 40 million cubic feet per day, which should go online next year.