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Natural Gas

Analysis: Bakken looks to add 350 MMcf/d of natural gas processing by year-end

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Analysis: Bakken looks to add 350 MMcf/d of natural gas processing by year-end

Highlights

Should boost flows on Northern Border Pipeline

Will increase gas capture rates

Denver —

Bakken natural gas production continues to set records and has the potential to surge even more before year's end as more processing capacity comes online, pushing greater volumes to US Midwest markets at the expense of imports from Western Canada.

Daily associated gas production in the oil-oriented patch set production records over three consecutive months this summer, according to the latest data released by the North Dakota Industrial Commission. However, the high volumes produced also led to a massive waste of molecules.

In July, producers flared, or burned off, 670 MMcf/d of natural gas at the wellhead. The primary cause was a lack of adequate gathering lines and/or gas processing capacity in areas where new production is coming online.

However, as production increased 69 MMcf/d month over month to more than 3 Bcf/d in August, operators lowered flaring to 577 MMcf/d. The startup of the Little Missouri IV processing plant likely led to the decline in flaring, according to S&P Global Platts Analytics. Flaring was still high at 19% for the month, well above the state's 12% mandate.

The drop in flared volumes is a sharp divergence from the prior three months when flaring increased each month. The increase in processed volumes from Little Missouri IV has allowed the Bakken to take an all-time high share of Northern Border Pipeline at the expense of Western Canada imports flowing to the Midwest.

Total Bakken deliveries to the pipeline are at an all-time high so far this month at 1.64 Bcf/d. Western Canadian volumes delivered to the pipeline are currently at 875 MMcf/d, just 10 MMcf/d more than the all-time low set in April, which was due in part to maintenance issues, according to Platts Analytics.

With significant processing capacity coming online by year-end, approximately 350 MMcf/d, producers will likely start to capture and send even more gas to market.

Additional processing capacity will enter service in the Bakken in less than two weeks as Kinder Morgan's Roosevelt processing plant in McKenzie County, North Dakota, nears completion. The project is currently on schedule for an estimated start-up date of November 1. It will provide approximately 150 MMcf/d of incremental processing capacity in the Williston basin once in service.

According to Platts Analytics' NGL Facilities Databank, an additional 200 MMcf/d of processing capacity is expected to enter service before the end of the year with the addition of Oneok's Demicks Lake processing plant. The Demicks Lake II plant is expected to be online in the first quarter of 2020.

The increased processing capacity in North Dakota will likely allow additional supply to displace and squeeze out even more Western Canadian imports along Northern Border pipeline. Year on year, production in the basin has increased by 150 MMcf/d as imports from Western Canada have shrunk by 250 MMcf/d, according to Platts Analytics.

(This content has been changed since last published to correct the volume and timing of Oneok's gas processing additions.)

-- Brandon Evans, bevans@spglobal.com

-- Richard Frey, richard.frey@spglobal.com

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