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North Dakota's Natural Gas Output to Gain on Oil Long-Term

July 30, 2012
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While oil production in North Dakota could more than quadruple by 2025 to more than 2 million b/d, natural gas could do even better, gaining by nearly six times over current production to 3.1 Bcf/d, according to an analysis commissioned by the state's Pipeline Authority and performed by Bentek Energy LLC.

The natural gas-to-oil production ratio in the basins gets larger with age. "The reservoir engineering review indicates that the Bakken and Three Forks oil decline curves are steeper than the associated gas decline curves," Bentek said in its 129-page report. "The primary driver is the falling reservoir pressure in the Bakken and Three Forks formations. As the pressure in the reservoir declines and reaches its bubble point pressure, the natural gas that is dissolved in the oil will escape, allowing it to be captured in the gas stream."

A similar rising gas-to-oil ratio (GOR) has been observed in the Montana portion of the Williston Basin, according to the report.

In addition to its base case, Bentek provided low and high case scenarios, which predicted 2025 gross gas production of 2.01 Bcf/d and 3.8 Bcf/d, respectively. This compares with the 536 MMcf/d produced in 2011. It would "push the basin into a more leading role in supplying the U.S. natural gas market." The analysis also suggested that natural gas liquids content may rise as reservoir pressure falls, but the analysis of a subset of wellhead data was "inconclusive."

The North Dakota Pipeline Authority requested the analysis to determine if adequate natural gas pipeline infrastructure exists in the state, Bentek said.

While the Williston Basin faces competition from western Canada for pipeline capacity to Chicago and other Upper Midwest markets, "oilsands demand and new [liquefied natural gas] exports are expected to consume a significant portion of western Canadian supply going forward.

"This, along with continued declines in Canadian natural gas supply, will tighten the Canadian supply-demand balance and alleviate some of the pressure on the Williston market, easing access to long-haul pipeline space." Superior economics in the Williston and competitive transportation rates will enable it to retain a strong foothold on Midwest markets, even if increasing Marcellus Shale production seeks markets farther west, according to the report.

The Williston Basin is served by three main interstate systems: Northern Border Pipeline, Alliance Pipeline and WBI Energy Transmission. But due to a lack of processing capacity nearly one-third of gas produced in the Bakken is flared.

"Given the ability of Williston Basin production to compete with neighboring basins for pipeline space, sufficient interstate pipeline capacity exists in the long term, to support production expectations in the area. However, other gas infrastructure in North Dakota is insufficient to handle the influx of associated gas," the report said.

Earlier this year North Dakota, which had no drilling rigs operating in 1999, became the second biggest oil producer in the nation, trailing only Texas (see NGI, May 21). The state has recorded a series of monthly oil and natural gas production highs. State officials have said the robust production growth indicates the need for more infrastructure to move output to market.

Justin Kringstad, director of the state's pipeline authority, said recently that nearly $3 billion in infrastructure improvements are planned to process more gas and move it to market, and six major oil pipeline projects also are proposed. If all of the pipelines are built, North Dakota's oil pipeline network would have 1.5 million b/d of capacity, he said.

"In the long term, more gathering and processing capacity projects will be required to move the 3.1 Bcf/d of gross gas expected under the base case scenario," said the report.

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