Oil-rich Bakken Shale Promises Natural Gas Growth Despite Fewer Rigs

Strong points

Oneok sees consistent volumes in current D&C business

Rising commodity prices offer an advantage

While oil production in most U.S. shale basins is not expected to reach pre-coronavirus levels until at least the end of 2023, additional processing and higher gas-to-oil ratios could still lead to gas growth. natural in the oil-rich Bakken.

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Oneok has increased its volumes of natural gas and natural gas liquids in the first quarter processed in the Williston Basin and plans to bring an additional 200 MMcf / d of processing capacity online before the end of the year, further reducing the flaring in North Dakota.

Gas volumes processed in the Rocky Mountain region increased 5% while NGL raw feed production volumes increased 20%, the company said in its first quarter 2021 earnings call on April 28. . -a one-year drilling activity in the region.

“The Williston Basin continues to exceed our expectations,” said Oneok CEO Terry Spencer. “The increase in our operations was not dependent on increased platform activity or commodity prices. Rather, it was based on DUC inventories, rising gas / oil ratios and demand. increased ethane. “

Oneok Operations Manager Kevin Burdick said, “There are 350 DUC wells on our dedicated acreage. With 10 finishing crews, there is no need for additional drilling or completion crews to maintain our volumes throughout the year. Any additional activity would be an advantage. “

With more than 200 MMcf / d of natural gas still being burned in the Bakken, according to the latest data from the North Dakota Industrial Commission, more gas volumes can still be captured even if production stagnates for the foreseeable future, especially with wells showing higher gas / oil ratios.

The company is moving forward with the expansion of its Bear Creek 200 MMcf / d natural gas processing plant and related infrastructure in the Williston Basin, which is expected to be completed in the fourth quarter of 2021.

Crude production

U.S. production of crude and condensate reached 12.8 million b / d in December 2019 and is not expected to reach such a level until the end of 2023, then grow slowly to a high of around 14 million b / d. j by 2030, according to S&P Global Platts Analytics. The sharp reduction in drilling and completion activity due to the pandemic, coupled with capital discipline, requires four years for production to reach pre-pandemic levels.

Fracking rigs and crews declined dramatically after the pandemic hit in March 2020. They recovered some as prices rose, but are still below pre-pandemic levels of 48% for the platforms. -horizontal oil forms and 26% for the fracturing teams.

In addition, despite better oil prices, several operators have maintained capital discipline and sidelined production growth. However, the risk is high with regard to private operators, who have been expanding platforms at a much faster rate than other operators and could accelerate their current growth trajectory, leading to production gains at a faster pace. fast than currently expected.

Global demand is a factor

Longer term, production growth beyond 2023 depends on several factors, including global demand, well failures, capital discipline and the quality of shale rock.

“Our forecast does not call for an increase in drilling activity in Midcon or Powder River, but it appears that activity could increase based on recent raw material prices,” said Burdick.

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