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Price, Drilling Downturn Aid North Dakota Gas Flaring Battle

Less drilling due to low commodity prices has reduced the amount of natural gas being flared in North Dakota.

In the state's latest monthly production report, Lynn Helms, director of the Department of Mineral Resources, reported overall gas capture for October at 86% statewide (87% for the Bakken area), well above a revised December target goal of 77%.

Part of the explanation for the reduction in flared gas is that the slowdown in completed wells has allowed gas gathering systems to catch up and boost capacities, in some cases above their nameplate volumes, Helms said. Oneok Partners' gathering system in the Bakken, for example, is running 100 MMcf/d above its nameplate capacity.

"Because of great weather and compression enhancements made during this summer, Oneok has been able to push their gas plants to 10% above their maximum capacity," Helms said. Oneok will be able to ease back on the overcapacity push in January, when its 200 MMcf/d capacity Lonesome Creek gas processing facility comes online, he said.

Operators responding to low commodity prices also took some wells off of shut-in or restricted status and held back on completing more new wells in October. "Also a lot of operators have been pretty pessimistic about future prices next year, so in October and November they saw an opportunity to produce oil at a relatively higher price than what is in effect now and what [are] projected to be the prices next year," Helms said. "They tried to produce and sell oil as much as they could."

Helms cautioned that the ramped-up processing over nameplate capacity cannot be sustained in the winter months. He did not speculate on whether the increased capture amounts can be sustained.

With price and production downturns, the Bakken is experiencing sales of blocks of wells to new entrants in the state's market, and Helms said it is not clear what they will be doing amid low prices. He cited nine sales to date, including the four biggest:

  • Occidental Petroleum Corp. (Oxy) and its unit, Oxy Little Knife LLC, sold 342 and four wells, respectively, to energy private equity firm Lime Rock Resources III-A LP;
  • American Eagle Operating LLC sold 87 of its wells to Resource Energy Can-Am LLC;
  • Whiting Oil and Gas Corp. sold 80 wells to White Rock Oil & Gas LLC and 42 wells to Cobra Oil & Gas Corp.; and
  • Corinthian Exploration (USA) Corp. sold 92 wells to Legacy Oil & Gas ND Inc, and Crescent Point Energy U.S. Corp.

"Whiting is selling the bulk of its legacy assets and a little of their Bakken/Three Forks assets," Helms said. "Oxy is the largest individual seller and it is exiting the Bakken."

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