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North Dakota producers fail to control natural gas flaring

Highlights

Operators flare 388 MMcf/d in June

815 MMcf/d of new processing by end of 2019

Denver — Gas production in North Dakota's Bakken Shale remains strong, but the inability to gather and process all the volumes led operators to flare nearly 17%, or 388 MMcf/d, of all gas produced during June, according to the latest data released by the North Dakota Industrial Commission.

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It marked the third straight month producers were unable to keep flaring within state regulations of 15% or less as companies there are primarily interested in much higher-value oil. Producers flared 15.5% in April, 17% in May and 16.8% in June. Starting November 1, only 12% of associated gas can be flared before possible fines kick in.

'TAPPING THE BREAKS'

Operators did manage to only flare 12% in March, but production has increased by about 200 MMcf/d since then to 2.3 Bcf/d. Also, some new wells coming online are in areas where there are not adequate gathering lines and processing facilities. And although gas production stayed steady month over month, dropping only 30 MMcf/d from May's all-time high, oil production fell by 2%, or 20,000 b/d, to 1.23 million b/d.

"The industry is tapping the brakes a little bit," said Lynn Helms, NDIC director.

Some operators voluntarily shut in some oil production during June in order to stay in compliance with the gas capture policy, he added.

But not all companies are able to meet the goals. Eleven producers captured less than the 85% target in April while nine failed to do so in May, according to NDIC data. June figures are still being analyzed.

Helms said companies are concerned about meeting the 12% goal in November, but some relief is on the way in the form of new processing plants and expansions.

NEW CAPACITIY

For example, Kinder Morgan recently submitted an application to the North Dakota Public Service Commission to expand processing capacity at the Roosevelt Gas Plant in McKenzie County by an additional 200 MMcf/d, from its current capacity of 60 MMcf/d. Construction could begin by mid-September 2018, with operations commencing by November 2019, pending PUC approval.

Currently, five gas processing plant projects are underway in North Dakota, bringing online 815 MMcf/d of additional capacity by the end of 2019, according to S&P Global Platts Analytics. Additional processing capacity in North Dakota will help producers reduce flaring in line with state rules, which require that producers capture 88% starting in about 75 days and then 91% by 2020, and could provide further dry gas production upside.

"We really expect some additional production records to be set before the end of the year," Helms said.

--Brandon Evans, bevans@spglobal.com

--Edited by Rocco Canonica, newsdesk@spglobal.com