The U.S. Energy Information Administration (EIA) said that although natural gas production in North Dakota has more than doubled since 2005, so far more than 35% of that production for 2011 has been flared or otherwise not marketed because of insufficient infrastructure in the Bakken Shale.
In a report released Wednesday, the EIA said natural gas production averaged more than 485 MMcf/d in September -- compared to the 2005 average of approximately 160 MMcf/d -- and attributed the increase to growing oil production in the Bakken, which in turn has brought in more associated natural gas. The agency also said natural gas production and the number of wells producing natural gas in the Bakken increased 20- and sevenfold, respectively, from 2007 to 2010.
"[But] the necessary natural gas infrastructure -- gathering pipelines, processing plants, transportation pipelines -- surrounding the Bakken Shale play has not expanded at the same pace, effectively stranding the natural gas that is produced during oil production," the EIA said, citing a North Dakota Department of Natural Resources (DNR) study that estimated nearly 36% of natural gas production in May 2011 did not make it to market.
According to the EIA, further analysis by the DNR revealed that most of the natural gas production that didn't make it to market -- 29% of the total gas produced -- was flared, with the remaining 7% unaccounted for or lost. The EIA said North Dakota's percentage of flared gas was "considerably higher" than the national average, which was 1% in 2009.
North Dakota state law, also known as the Century Code, allows crude oil producers to flare associated natural gas for a one-year period from the date of first production from the well. After one year, the flaring must cease and the well capped, connected to a gas gathering line or equipped with an electrical generator that consumes at least 75% of the gas from the well. Operators who violate this proviso must pay royalty owners and gross production taxes based on the value of the flared gas.
Several oil and gas companies plan to spend about $3 billion on infrastructure projects to capture natural gas production that is not currently being brought to market (see Shale Daily, Oct. 12).
The EIA's findings closely mirror those of the North Dakota State Industrial Commission, which announced that the state had produced 14.55 Bcf of natural gas and 13.92 million bbl of oil in September, up from the 10.67 Bcf and 10.64 million bbl produced in October 2010 (see Shale Daily, Nov. 11).
The DNR's Oil and Gas Division said 8.66 Bcf of the natural gas produced in September was sold, which means about 5.89 Bcf -- more than 40% of production -- was not brought to market.
According to NGI's Shale Daily Unconventional Rig Count for the week ending Nov. 25, drilling activity in the Bakken/Sanish/Three Forks is up 27% from a year ago with 200 rigs active, up from 157 a year ago.