Bakken Update - June 28
Posted: Fri Jun 29, 2018 8:49 am
Tom Abrams – Morgan Stanley
June 28, 2018
Base growth appears manageable but flaring constraints and, in some areas, gas processing or lack of NGL connectivity could limit the Bakken's ability to respond if additional capital is allocated to it from other basins.
Tightening flaring regulations could put a lid on an acceleration in activity. Despite 770 MMcf/d of new processing capacity coming online over the next 18 months, flaring remains an issue within the basin (largely due to infrastructure constraints). Statewide flaring currently stands at ~85% as April 2015, with levels tightening to 88% in November and 91% in 2020.
In contrast, no bottlenecks in sight for crude. In-service of the Dakota Access Pipeline (DAPL) in 2Q17 meaningfully expanded takeaway options and provides today 525 Kb/d of capacity.
Despite more than adequate pipeline capacity in the region, crude continues to move by rail to coastal markets. Recent widening for Brent-WTI has incentivized a pick-up in barrels moved by rail.
Gas processing additions should support growth, but infrastructure and flaring constraints likely to persist. On paper, there is adequate processing capacity based on production estimates, however flaring constraints would likely limit meaningful production growth beyond current expectations. Despite ~80% of processing located in core McKenzie, Williams, and Dunn counties and available processing capacity, a relatively large amount of flaring also exists within these counties.
NGLs could remain an operational constraint. NGL pipeline capacity out of the region is fully utilized until ONEOK's Elk Creek comes online in 4Q19. In the interim producers are relying upon rail, which has been more difficult to come by, given the drop in rail activity in the region in the past year having led some facilities to be mothballed or repurposed.
June 28, 2018
Base growth appears manageable but flaring constraints and, in some areas, gas processing or lack of NGL connectivity could limit the Bakken's ability to respond if additional capital is allocated to it from other basins.
Tightening flaring regulations could put a lid on an acceleration in activity. Despite 770 MMcf/d of new processing capacity coming online over the next 18 months, flaring remains an issue within the basin (largely due to infrastructure constraints). Statewide flaring currently stands at ~85% as April 2015, with levels tightening to 88% in November and 91% in 2020.
In contrast, no bottlenecks in sight for crude. In-service of the Dakota Access Pipeline (DAPL) in 2Q17 meaningfully expanded takeaway options and provides today 525 Kb/d of capacity.
Despite more than adequate pipeline capacity in the region, crude continues to move by rail to coastal markets. Recent widening for Brent-WTI has incentivized a pick-up in barrels moved by rail.
Gas processing additions should support growth, but infrastructure and flaring constraints likely to persist. On paper, there is adequate processing capacity based on production estimates, however flaring constraints would likely limit meaningful production growth beyond current expectations. Despite ~80% of processing located in core McKenzie, Williams, and Dunn counties and available processing capacity, a relatively large amount of flaring also exists within these counties.
NGLs could remain an operational constraint. NGL pipeline capacity out of the region is fully utilized until ONEOK's Elk Creek comes online in 4Q19. In the interim producers are relying upon rail, which has been more difficult to come by, given the drop in rail activity in the region in the past year having led some facilities to be mothballed or repurposed.