North Dakota produced 3.51 Bcf/d of natural gas in May, up 0.5% from April, despite a 3.9% month/month decline in oil output and an oversupplied gas market.
The divergent figures reflected rising gas-to-oil ratios (GOR) in the Bakken Shale, according to North Dakota Pipeline Authority Director Justin Kringstad.
The statewide GOR in May averaged 2.93 Mcf of natural gas per bbl of oil produced, the highest monthly figure on record.
GORs have been on the rise as top tier inventory in the oily Bakken is depleted, and producers increasingly move into the play’s gassier second and third tier areas.
“We certainly will be hitting record levels of natural gas production here in the coming months,” said Kringstad during a press briefing last week. “It’s going to be critical as gas volumes grow to new high levels, that the infrastructure is capable of keeping pace with that.”
The rise in natural gas output has come amid stubbornly low prices in North America, as summer cooling demand has failed to put a dent in storage inventories.
The daily natural gas price at NGI’s Northern Border Ventura, a useful proxy for Bakken prices, averaged $1.725/MMBtu on Wednesday (July 24). The Northern Border Pipeline system is the main artery for Bakken natural gas heading to Chicago and other downstream markets.
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A key indicator to measure takeaway constraints in North Dakota is how many new wells have been connected to gas gathering infrastructure in a given month versus how many new wells are producing, according to Kringstad. “We did see in May a spread there, which is not something we want to see,” he said. “One month doesn’t make or break the scenario, but if we start to see some type of trend, that’s when things become certainly more concerning.”
Some relief is on the way on the natural gas transport front, Kringstad said, with the 20,600 Dth/d Wahpeton Expansion pipeline project slated to enter service by year-end. Sponsored by WBI Energy Inc., the roughly 60-mile pipeline would serve the state’s southeastern corner.
More takeaway projects will be needed, however, Kringstad said. “If operators have acreage options in North Dakota and Oklahoma and Texas and other places, if they’re starting to see gas constraints limiting their ability to operate in North Dakota, they can just move that capital elsewhere,” he cautioned.
Kringstad also stressed the importance of adding natural gas storage capacity in North Dakota. “That is something that is in most discussions right now with midstream participants, is how storage may play an increasingly important role in our midstream development,” he said. “We’re seeing more interest for in-state demand for either power generation or other industrial uses, and in order to mirror that demand side with the production side, those don’t always work perfectly…and so storage is going to be a critical component going forward.”
On the upstream front, North Dakota had 14 hydraulic fracturing crews active as of mid-July, according to the state’s Department of Mineral Resources. The drilling rig count stood at 39, in line with recent monthly averages. Oil production averaged 1.195 million b/d in May, versus 1.243 million b/d in April.
