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Bakken Facing Two-Phase, $9B Infrastructure Build-Out

North Dakota’s Bakken Shale’s next infrastructure buildout for growing crude oil production should begin in about two years, with overall needs estimated to cost $9 billion, according to the state’s chief oil and gas regulator.

Department of Mineral Resources Director Lynn Helms outlined the coming infrastructure needs on Thursday at the Williston Basin Petroleum Conference (WBPC) in Bismarck. He expects a production surge to a "bigger, faster, stronger" Bakken, but said the industry won't get there without adding more pipelines and an estimated 2,000-2,500 miles of gathering lines per year  to handle production volumes of 1.5-1.7 million b/d.

The conference, which drew more than 2,500, was focused on the industry's increasing ability to roll out exploration and production efficiencies. The theme, “Bakken Now,” dovetailed into what Helms said was "Bakken Next," a forecast for the 2020s.

All of the major infrastructure work cannot be streamlined by technological advances and innovation, as costs are not likely to decline nor will the permitting process be shorter.

"Ideally, we should have begun two years ago planning the next major pipeline out of the play," Helms said, and he urged the upstream-heavy audience to commit early to new pipeline capacity.

"Get the pipeline built because there is no time to get that project started. If we go back to the numbers of completions we anticipate annually, we need to be building 2,000-2,500 miles of gas gathering pipelines every year through 2025," Helms said. "There is no time like the present for operators to get their rights-of-way in place."

About $3 billion worth of pipelines and five gas processing plants are underway, which should keep volumes flowing smoothly through 2021, but beyond that, “another $6 billion in infrastructure that will have to be built," Helms said.

There are some near-term options, he said, such as the Keystone XL oil pipeline's northern segment from Canada. In addition, Alliance Pipeline is testing support in an open season through Wednesday (May 30) for 400 MMcf/d of added capacity.

Even with some options in place, the state by by 2026 needs additional gas capacity, Helms said.

Chicago is getting surfeited as a market for Bakken gas, so Helms said the state needs to look fertilizer plants, petrochemical plants and/or a new pipeline to the West.

"We need to put our thinking caps on, get some capital and build new infrastructure to move natural gas” and natural gas liquids (NGL) as the Bakken “has some of the wettest gas on the face of the earth.”

Marathon Oil Corp.'s Mike Henderson, vice president for resources plays in the northern United States, also addressed the conference. He acknowledged why concerns about future infrastructure are real as he thinks the Bakken is "the benchmark for a high-tech shale oilfield.”

Operators have been ingenious in finding better ways to generate data, analyze it and apply it back to drill sites, Henderson said.

Marathon historically has produced more than 100 million bbl of oil in the Bakken, but Henderson said a trademark of the company’s employees and operators throughout the basin is "to never be satisfied with the status quo." Marathon has come back from being "nearly inactive" in the Bakken two years ago, but "that's when the story got interesting for us, and our teams got real focused on maximizing well productivity."

Other Bakken producers said the 2014-16 oil price crash motivated their teams to develop the innovations that today are reducing production costs.

"In the second half of 2016, we began bringing on record wells," said Henderson. Marathon had  no rigs operating then, but by the end of 2017 it had five rigs online.

He said Bakken operators also need to pay close attention to data sets, as operators are doing across the industry as plays increasingly become digital oilfields. Key questions can be answered with greater precision and accuracy, "but we have to really look closely at the data.”

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