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Gas capture issues continue to prevent North Dakota from setting oil production records

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Gas capture issues continue to prevent North Dakota from setting oil production records

Highlights

State flaring more than 500 MMcf/d

New infrastructure crucial to solving problem

Bismarck, N.D. — North Dakota's Bakken oil production could top easily 2 million b/d, but gas capture constraints continue to plague producers and limit growth, Lieutenant Governor Brent Sanford said Tuesday.

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"We are now at 1.39 million b/d, just below the record of 1.4 million b/d set in January, and that is with a lower rig count than we had one year ago, due to technological gains," Sanford said at the Bakken Oil and Gas Conference Expo in Bismarck. "The only thing keeping us from setting a new oil production record is our gas production. It is outpacing our oil production and makes it difficult to meet our gas capture goals. The gas-to-oil ratio continues to rise as producers better understand the shale."

About 19%, or about 536 MMcf/d, of the estimated 2.82 Bcf/d of natural gas produced in North Dakota was flared in May, according to North Dakota Pipeline Authority data released Tuesday. About 423 MMcf/d was flared due to challenges or constraints on existing gathering systems. The remainder was flared from wells with zero sales.

In May, the number of new wells producing gas outpaced the number of new wells selling gas, according to Justin Kringstad, the authority's director.

"How do we overcome this obstacle?" Sanford asked. "That's the 2 million b/d question. The gas capture challenge is limiting further growth. We believe the solution is through investment and innovation, not regulation or more red tape."

The North Dakota Industrial Commission's current gas capture goals currently set a limit of 12% of statewide production to be flared. That goal is scheduled to fall to 9% beginning in November 2020.

Lynn Helms, director of the North Dakota Department of Mineral Resources, said the state should be back in compliance with flaring goals late this year as new gas capture infrastructures comes online.

"There's no silver bullet," Sanford said. "In my home county there are $1.5 billion currently invested in gas plants under construction. Hopefully, a lot of that will come online in the next six to 12 months. This will give us additional processing capacity of 1.65 Bcf/d. Even with that, it will take more investment to keep growing production."

Helms said gas production is forecast to outpace the growth of that infrastructure by mid-2022 when the state could fall out of compliance again.

"That's not a lot of breathing room," Helms told reporters Tuesday.

North Dakota oil production averaged 1.39 million b/d in May, up 800 b/d from April. But producers "self-restricted" about 25,000 b/d of oil production in order to stay within gas capture limits, Helms said.

Sanford also said the state needs to increase its percentage of gas-fired power generation, which could help alleviate the gas capture issue.

Another challenge facing the industry is a lack of workers in North Dakota. He estimated there are as many as 30,000 job openings. This includes positions ranging from gas plant operators to refinery positions to truck drivers.

"We have more jobs available than people who need a job," Sanford said. "We have to find a way to attract people from other states and other countries to move here."

-- Brandon Evans, bevans@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com

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