Bakken Shale / Shale Daily / E&P / Rockies/Other / NGI All News Access

Bakken Said to Face Competition for Other Onshore Play Capital, Crews

Growth in North Dakota's Bakken Shale may be scaled back following a pick up in activity in at least one resurgent play that extends from Texas into Louisiana, according to the state’s director of the Department of Mineral Resources.

During a webinar last Friday to discuss the state’s monthly production report, Lynn Helms said three Bakken producers are “going into the Austin Chalk in a big way.” The formation extends from the Eagle Ford Shale in South Texas into southeastern Louisiana.

The Energy Information Administration in 2012 estimated the chalk formation holds 2.7 billion bbl of technically recoverable resources; some estimates put the figure even higher. Helms said the U.S. Geological Survey has estimated it holds 4 billion bbl.

Operators that work in the Bakken, including ConocoPhillips, EOG Resources Inc. and Marathon Oil Corp. “have announced in the last few months that they have bought a bunch of acreage in the Austin Chalk and they are ready to take the new hydraulic fracturing technology there,” Helms said.

The Austin Chalk emerged as unconventional drilling took off in the early 2000s. However, "variable well performance" led a few operators to sell assets and move to other plays, Helms said.

"Now they are going back, so we are going to have to compete with not only the Permian, Eagle Ford, and Anadarko, but another new play," he said.

Future competition for the Bakken by other plays is expected to come from capital investments and for personnel, according to Helms, who called workforce limitations a “major factor." North Dakota's 62 drilling rigs matches up with the state's current 35-36 fracturing crews, which now move in sync with each other.

"Until a qualified, talented workforce shows up and starts coming to job fairs, we're going to be restricted in how quickly activity and production can grow," said Helms. It may take a “major effort” to increase Bakken production if other plays pull away funding and people, he said.

At the same time, price differentials are widening. Director Justin Kringstad of the North Dakota Pipeline Authority and Helms said there is a renewed increase to ship by rail more Bakken sweet crude.

"Price differentials have basically flip-flopped from where they were a year-and-a-half to two years ago when the big discount was in North Dakota and the little discount was in West Texas," Helms said.

The opposite is in effect now, with Bakken crude marketed at a premium to West Texas Intermediate (WTI) prices and with West Texas marketed at a steep discount.

Kringstad said WTI and Brent price differentials continue to widen, putting more pressure on Bakken operators to ship via rail.

 "When we have seen movements in the rail and pipelines relative use, it has been in the $5.00-6.00/bbl range that prompts shippers to move to rail,” Kringstad said. "For barrels not tied to a pipeline and with the flexibility to move on an alternate transportation mode, that seems to be a threshold number to use.”

Kringstad is expecting to see a lot more Bakken crude shipped by rail, given the current $9.00-10.00/bbl spread. "Those are barrels that aren't typically tied to one of the pipeline networks.”

Copyright ©2018 Natural Gas Intelligence - All Rights Reserved.
ISSN © 2577-9877 | ISSN © 2158-8023

Recent Articles by Richard Nemec

Comments powered by Disqus