trending Market Intelligence /marketintelligence/en/news-insights/trending/dsM0RED-oUz6nzli3jxgZw2 content esgSubNav
In This List

Bakken gas production hit record high in January; flared gas decreased


Insight Weekly: SVB fallout limited; US rents up; renewable natural gas investments flow in


Master of Risk | Episode 1: Discussion with Natalia Hunik, CRO, Cubelogic


A Cloud Migration Plan for Corporations featuring Snowflake®


Investor Activism Campaigns Hit Record High in 2022

Bakken gas production hit record high in January; flared gas decreased

For the second month in a row, oil and gas operators in North Dakota's Bakken Shale managed to grow natural gas production while lowering the volume of gas flared.

Bakken production posted a new record high of 2.72 Bcf/d in January, according to data released March 15 by the North Dakota Industrial Commission, or NDIC. At the same time, the volume of gas flared dropped slightly to 18.6% of daily production, or 507 MMcf/d. It went as high as 21% in November 2018 but is starting to decline as new gas processing and gathering systems come online. However, most producers are still not reaching the state's mandated gas capture of 88%.

Although producers have posted back-to-back months of gas production records, several factors prevent even stronger growth in the play.

"Gas capture, workforce limitations and competition with the Permian and Anadarko shale oil plays for capital continue to limit drilling rig count," NDIC Director Lynn Helms said. "The drilling rig count was down one from December [2018] to January, decreased another two from January to February, and is currently up one from February to today. Current operator plans are to add two to eight rigs in 2019 depending on workforce and infrastructure constraints."

Half-cycle internal rates of return, which ignore sunk costs, favor the Bakken over most other oil-rich plays. March half-cycle internal rates of return in the Bakken rank third in the U.S. at 36.8%, according to S&P Global Platts Analytics. Only the Permian Midland and Delaware sub-basins boast higher returns at 45.5% and 43.9%, respectively.

Platts Analytics expected gas production to grow by 117 MMcf/d year over year due to drilling efficiencies and a large backlog of drilled but uncompleted wells, or DUCs.

For example, Continental Resources Inc. was able to cut drilling and completion costs by $200,000 per well by decreasing the number of completion stages from 60 stages to 45 stages. While the company plans to run six active rigs in the region this year, compared to about eight rigs over the course of 2018, they have built a robust inventory of DUC wells in the Bakken.

According to Platts Analytics completion data, Continental has about 165 DUC wells in the Bakken, roughly 30% of the total available DUC wells in the region.

In other limitations, Bakken supply is limited by Northern Border Pipeline Co. takeaway and will have to continue to push out Western Canadian gas as production grows. As it stands, Bakken gas comprised an average of 55% of the total on the system over the past six months, a year-over-year increase of 9 percentage points.

More processing capacity is necessary to support significant production growth. In 2019, more than 0.8 Bcf/d of processing capacity could enter service, but the majority of this capacity is anticipated to come online in the second half.

Brandon Evans is a reporter with S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.