Released January 07, 2020 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Natural gas producers in the Bakken Shale are still flaring a lot of gas, despite recent expansions of the state's processing and transportation infrastructure. Last month, a regulatory panel in North Dakota approved a measure to expedite construction of new gas infrastructure to reduce energy waste and bring producers into compliance with state laws on flaring.
Most of the gas being produced in that region comes up naturally with crude oil. So-called "associated gas" often is an unwanted byproduct of extracting oil, as low prices for gas makes it uneconomic to process and transport. Dramatic increases in crude oil production in the Bakken (as well as the Permian Basin) have meant increased amounts of associated gas, which has overwhelmed companies' ability to process and transport it. Infrastructure bottlenecks continue to bedevil companies in both regions.
In the Bakken Shale, located mostly under North Dakota, crude oil and gas production has soared in recent years. Each day in December, producers extracted about 1.5 million barrels of oil and 3.1 billion cubic feet of gas from that formation, according to the most recent Drilling Productivity Report from the U.S. Energy Information Administration (EIA).
Click on the image at right to see a decade of growth in crude oil and natural gas production from the Bakken Shale.
Roughly 31 oil and gas Processing, Pipeline and Storage projects valued at about $1.7 billion are scheduled to begin construction in North and South Dakota between January 2019 and January 2021, according to Industrial Info's Global Market Intelligence platform. Most of those projects, about $1.5 billion, are slated to be built in North Dakota.
Those projects, as well as ones still on the drawing board, may get a boost following the December 17 decision by the North Dakota Industrial Commission that seeks to lower the risks of investing in new infrastructure. The commission approved an order that lets gas producers and companies that purchase their gas enter into contracts that allow for firm service, which guarantees space for the producer's gas on pipelines.
Under the new order, pipelines that have contracts for gas under a firm service agreement are expected to face less risk when ordering compressors and other equipment needed for a greenfield or expansion project. Previously, the state did not allow firm service contracts, fearing they could be considered discriminatory against non-firm shippers.
The industrial commission, which is chaired by the governor and includes two other commissioners, prohibits gas venting, the direct release of gas into the atmosphere, according to the EIA. It has been wrestling with ways to reduce flaring. In 2014, after a year when 30% to 35% of all gas produced in the state was flared, the panel adopted an order lowering the percentage of gas that can be flared in a given year.
Order 24665 required gas flaring to decline to 23% of production starting January 1, 2015. Producers who exceed that limit face production restrictions at particular wells, and some producers were forcibly curtailed. Effective January 2016, gas flaring was limited to 15% of production. For 2019, the flaring limit was 12%. This year, the limit falls to 9% of all gas produced. For more on that, see April 14, 2015, article - Gas-Flaring Rule Reduces North Dakota Crude-Oil Production.
"We're not (in compliance) because the infrastructure has lagged behind gas production," Mineral Resources Director Lynn Helms told the industrial commission, according to a report in The Bismarck Tribune. "We (need to) be able to break out of this paradigm of always being a year or two behind the production curve," he said.
Producers have been unable to comply with Order 24665 because of surging gas production and insufficient processing, transportation or storage options. The EIA reported that North Dakota flared 17% of its total gas production in 2018, the highest percentage of any state. That percentage spiked up to 24% last June before falling to 19% in August and 17% in October, which was still over the state's 12% level, according to the state's industrial commission.
Click on the image at right to see two graphics on gas flaring in North Dakota.
According to Industrial Info's Global Market Intelligence platform, approximately 39 oil and gas processing, pipeline and storage projects valued at about $1.8 billion were completed in North Dakota between January 2017 and December 2019. This has relieved some of the bottlenecks, but by no means all. For more on that, see October 22, 2019, article - Project Spending in Bakken Formation Rises with Oil & Gas Production.
In 2019, North Dakota's gas processing capacity averaged about 3.2 billion cubic feet per day (Bcf/d), a 48% increase over 2017 capacity, according to the North Dakota Pipeline Agency, a division of the state's industrial commission. Looking out to 2021, the agency forecast gas processing capacity will increase a further 20%, to about 3.8 Bcf/d.
State officials also are reportedly investigating the feasibility of creating a petrochemical industry cluster in North Dakota to take some of the natural gas liquids (NGLs), which also are produced with crude oil. Bakken crude oil has a relatively high proportion of NGLs compared with other regions. But attracting petrochemical manufacturers to North Dakota is a long-term proposition that may be a farther-off solution compared with accelerating construction of more midstream capacity in the state.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Most of the gas being produced in that region comes up naturally with crude oil. So-called "associated gas" often is an unwanted byproduct of extracting oil, as low prices for gas makes it uneconomic to process and transport. Dramatic increases in crude oil production in the Bakken (as well as the Permian Basin) have meant increased amounts of associated gas, which has overwhelmed companies' ability to process and transport it. Infrastructure bottlenecks continue to bedevil companies in both regions.
In the Bakken Shale, located mostly under North Dakota, crude oil and gas production has soared in recent years. Each day in December, producers extracted about 1.5 million barrels of oil and 3.1 billion cubic feet of gas from that formation, according to the most recent Drilling Productivity Report from the U.S. Energy Information Administration (EIA).
Roughly 31 oil and gas Processing, Pipeline and Storage projects valued at about $1.7 billion are scheduled to begin construction in North and South Dakota between January 2019 and January 2021, according to Industrial Info's Global Market Intelligence platform. Most of those projects, about $1.5 billion, are slated to be built in North Dakota.
Those projects, as well as ones still on the drawing board, may get a boost following the December 17 decision by the North Dakota Industrial Commission that seeks to lower the risks of investing in new infrastructure. The commission approved an order that lets gas producers and companies that purchase their gas enter into contracts that allow for firm service, which guarantees space for the producer's gas on pipelines.
Under the new order, pipelines that have contracts for gas under a firm service agreement are expected to face less risk when ordering compressors and other equipment needed for a greenfield or expansion project. Previously, the state did not allow firm service contracts, fearing they could be considered discriminatory against non-firm shippers.
The industrial commission, which is chaired by the governor and includes two other commissioners, prohibits gas venting, the direct release of gas into the atmosphere, according to the EIA. It has been wrestling with ways to reduce flaring. In 2014, after a year when 30% to 35% of all gas produced in the state was flared, the panel adopted an order lowering the percentage of gas that can be flared in a given year.
Order 24665 required gas flaring to decline to 23% of production starting January 1, 2015. Producers who exceed that limit face production restrictions at particular wells, and some producers were forcibly curtailed. Effective January 2016, gas flaring was limited to 15% of production. For 2019, the flaring limit was 12%. This year, the limit falls to 9% of all gas produced. For more on that, see April 14, 2015, article - Gas-Flaring Rule Reduces North Dakota Crude-Oil Production.
"We're not (in compliance) because the infrastructure has lagged behind gas production," Mineral Resources Director Lynn Helms told the industrial commission, according to a report in The Bismarck Tribune. "We (need to) be able to break out of this paradigm of always being a year or two behind the production curve," he said.
Producers have been unable to comply with Order 24665 because of surging gas production and insufficient processing, transportation or storage options. The EIA reported that North Dakota flared 17% of its total gas production in 2018, the highest percentage of any state. That percentage spiked up to 24% last June before falling to 19% in August and 17% in October, which was still over the state's 12% level, according to the state's industrial commission.
According to Industrial Info's Global Market Intelligence platform, approximately 39 oil and gas processing, pipeline and storage projects valued at about $1.8 billion were completed in North Dakota between January 2017 and December 2019. This has relieved some of the bottlenecks, but by no means all. For more on that, see October 22, 2019, article - Project Spending in Bakken Formation Rises with Oil & Gas Production.
In 2019, North Dakota's gas processing capacity averaged about 3.2 billion cubic feet per day (Bcf/d), a 48% increase over 2017 capacity, according to the North Dakota Pipeline Agency, a division of the state's industrial commission. Looking out to 2021, the agency forecast gas processing capacity will increase a further 20%, to about 3.8 Bcf/d.
State officials also are reportedly investigating the feasibility of creating a petrochemical industry cluster in North Dakota to take some of the natural gas liquids (NGLs), which also are produced with crude oil. Bakken crude oil has a relatively high proportion of NGLs compared with other regions. But attracting petrochemical manufacturers to North Dakota is a long-term proposition that may be a farther-off solution compared with accelerating construction of more midstream capacity in the state.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
