No longer playing catch up, the oil and natural gas infrastructure in the Bakken Shale in North Dakota has hit its stride, and the outlook appears sunny into early 2020, state oil and gas officials said.
With the controversial Dakota Access Pipeline (DAPL) now ramping up its substantial oil transportation volumes, a natural gas processing plant is being pursued south of Watford City in the Fort Berthold Reservation, where gas takeaway projects are working their way through the Bureau of Indian Affairs (BIA) right-of-way permitting process, according to Lynn Helms, director of the North Dakota Department of Mineral Resources.
On the crude oil side, 78% of the production in June was transported by pipelines, and the volumes going by rail plummeted to 7%, said Justin Kringstad, director of the North Dakota Pipeline Authority. Kringstad expects adequate pipe capacity for moving Bakken crude into the early 2020s.
A unit of Arrow Midstream Holdings LLP has announced plans for a gas gathering plant about 7.5 miles south of Watford City that would have capacity of up to 200 MMcf/d, said Helms. Construction would not start before next year. "Probably the biggest problem is the BIA right-of-way process, and there is a serious proposal to have the federal agencies delegate that authority to the Native American tribes on Fort Berthold," he said.
Arrow Field Services has filed with the North Dakota Public Service Commission (PSC) for a corridor and route permit for both natural gas and natural gas liquids (NGL) pipelines, with a proposal to begin construction next spring, Helms said. "The gathering pipelines require BIA permits, but the processing plant itself only requires PSC approval."
DAPL was in full operation for the first time in June, and there was a significant shift in the pipeline-rail ratio, with a large uptick in the pipeline market share, along with an increase in the refined market share, Kringstad said.
For the first time in years beginning in June “we have adequate pipeline capacity to move all of the Bakken production," he said. "That prompts the question about how long that will last. Based on my forecast of future Williston Basin oil production, it won't be until somewhere in the early to mid-2020s that we get ourselves back in the position of looking at oil production exceeding pipeline capacity."
Kringstad said the industry is doing internal forecasts and looking at the same period because it takes three to five years to complete any sizable pipeline project. "Operators looking at this region for opportunities are looking at these types of forecasts trying to figure out when and if additional pipeline capacity will be needed." For the near-term there is adequate pipe capacity in the Williston, he said. “Longer term, the market will decide what is added -- pipeline capacity or rail."
At the same time, other macroeconomic and regulatory issues may weigh heavily on the Bakken,according to Helms. And the state is being impacted by what he characterized as "elephants fighting."Examples include limits on oil output by the Organization of the Petroleum Exporting Countries being ignored by some cartel members, along with accelerated production in the Permian Basin, the combination of which is dampening Bakken production, he said.
A second source of "elephants" is found in a slew of Obama administration rulemakings that are ensnared in various court battles despite the Trump administration's attempts to disentangle them.