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Bakken NatGas Flaring Reduction Goals at Risk from Low Oil Prices

North Dakota's aggressive goals to reduce natural gas flared from oil production could be sidetracked by low crude oil prices, the state's chief oil and gas regulator told a legislative panel on Monday.

In a presentation to the Government Finance Interim Committee, Department of Mineral Resources (DMR) Director Lynn Helms stressed the efficiencies, cost savings and concentration of production. However, he also noted that oil prices have wallowed, which may pressure advances made in reducing state gas capture levels.

Helms stressed that a number of gas projects have been delayed by the low commodity price environment, which could hinder the push for operators to collectively achieve a state goal of 90% capture by 2020 (see Daily GPIJuly 28). Most recently, the statewide capture figure was 82%.

While the percentage of gas captured has risen, the volumes being flared have continued to creep up. In May, the most recent month with complete statistics, 293 MMcf/d was flared, an increase of 23.5 MMcf/d, according to Helms.

Lower prices have dramatically reduced the number of rigs in the four counties in the heart of the Bakken play -- Dunn, McKenzie, Mountrail and Williams. Helms said 67 of the 73 rigs still operating in the state are in those four counties. More than double that number were operating last November. The cost/bbl for oil produced in those four counties, along with four others, is still below break-even prices for crude, he said.

In July, production and estimated ultimate recovery (EUR) totals increased by 20%, while well costs, operating costs and crude oil prices are down by 12%, 20% and 54%, respectively, he noted.

As an example of the increased efficiency that has been accelerated in the low commodity environment, Helms said a rig in the Bakken in 2009-2010 could complete eight to 10 wells annually. Between now and 2016, the numbers should rise by 20-24 wells/year for each rig in operation.

However, even with the efficiency savings, there is a "very serious problem" for getting gas gathering projects completed in a sub-$70/bbl price environment, he said.

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