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ANALYSIS: Strong gas production drives Bakken Shale flows on northern border to new highs

Highlights

Gas takes larger share of capacity despite oil slump

Additional processing capacity set to come online

Denver — Despite rig counts in the Bakken Shale remaining low due to a pullback last spring by operators, natural gas production in the North Dakota play averaged an all-time time high last month and is slated to grow even more in early 2021 as new processing capacity comes online.

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This may lead to greater Bakken volumes moving to the US Upper Midwest, pushing against imports from Canada. Despite oil production languishing, associated gas production remains strong due to additional gas capturing and processing capacity.

Oil production is down by 300,000 b/d since the high set in November 2019, according to the latest data from the North Dakota Industrial Commission. Meanwhile, gross gas production is only down a little more than 200 MMcf/d from highs set in fall 2019.

However, according to data compiled by S&P Platts Analytics, dry gas production is hitting record highs in the play. Additional processing capacity could further increase already record Bakken production.

Bakken production has increased to 2.1 Bcf/d, which is 135 MMcf/d above December 2019 and an all-time record. This has also pushed Bakken utilization on Northern Border Pipeline to new highs, at 2 Bcf/d, or 180 MMcf/d above December 2019 levels. Norther Border transports gas from Western Canada and the Bakken to markets in the US Upper Midwest

In December, West Canada gas demand fell below December 2019 levels while outflows to the US Pacific Northwest reached capacity. As a consequence, Northern Border averaged 2.7 Bcf/d in December, its capacity, and flows alongGreat Lakes Gas Transmission from West Canada have increased 454 MMcf/d year-on-year to 1.3 Bcf/d during the month.

The Bakken has accounted for 1.97 Bcf/d of total production pushed onto Northern Border so far this January, according to Platts Analytics, which was up from the 1.96 Bcf/d it averaged in December. That was a record month for Bakken flows on the pipeline following a then-record high of 1.92 Bcf/d in November.

Platts Analytics expects Bakken production to fall 134 MMcf/d in February to 2 Bcf/d. The basin, however, is still waiting for the start of an additional 200 MMcf/d of processing capacity from Outrigger Energy slated to start operations in the coming weeks. This additional processing and supply from the Bakken could add upside risk next month to already stronger-than-expected Bakken production.

"Moreover, this additional midstream capacity for gas production north of the Missouri River allows the State of North Dakota to make strides towards its goal of minimizing gas flaring in the Basin," said Outrigger CEO Dave Keanini, in a statement.

In October, producers captured 93% of the 2.87 Bcf/d of gross gas produced during the month. Just one year prior, companies captured 84% of 3.05 Bcf/d, according to NDIC data.