Sunday, August 19, 2012
By 2025 natural gas production in the Williston basin could increase nearly six-fold over current levels, pushing North Dakota into a competitive position in the U.S. natural gas market. That was one of the conclusions drawn by Bentek Energy in a recently released report commissioned by the North Dakota Pipeline Authority and North Dakota Industrial Commission.
Titled “The Williston Basin: Greasing the Gears for Growth in North Dakota,” the Bentek report was commissioned to forecast natural gas production in the Williston basin through 2025 to determine whether North Dakota has sufficient infrastructure to handle natural gas demands in the future as oil wells mature and the gas-to-oil, GOR, ratio changes.
North Dakota officials had previously estimated $3 billion to $5 billion would be required to build the necessary infrastructure to handle the basin’s natural gas demands, but with the results of the Bentek study, Kringstad said that investment may need to be as much as $15 billion.
The Bentek study may also be used as a planning tool by private industry to develop the necessary natural gas infrastructure. “There are companies that are looking for the next opportunity,” Kringstad said.
Bentek estimates that an average well in the basin currently has a return of 58 percent, which makes the Williston basin one of the best performing basins in North America. But the gas has to get to market and there is competition for pipeline space to Chicago and other Midwest markets. For the long term, there will be sufficient interstate pipeline capacity, but currently there is insufficient gathering and processing capacity. While some of this insufficient capacity is being addressed, Bentek found that in the long term, additional gathering and processing projects will be necessary to move the 3.1 billion cubic feet per day of natural gas that Bentek predicts will be produced through 2025.
Current North American natural gas market
In evaluating the future for natural gas production in the basin, Bentek first looked at the current natural gas market in North America, and noted that the market “is undergoing dramatic changes as new technology and efficiency improvements in the exploration and production (E&P) sector continue to drive rapid gas production growth.” Funded by Henry Hub gas prices as high as $13 per million Btu in 2008, research advanced such technologies as pad drilling, drill bit steering and hydraulic fracturing among others. These technologies enhanced natural gas production, not only in conventional plays, but also in unconventional plays such as the Pinedale/Jonah in Wyoming, the Piceance in Colorado, the Barnett in Texas, the Fayetteville in Arkansas, the Woodford in Oklahoma, the Haynesville in Louisiana and the Marcellus in Pennsylvania.
According to Bentek, total Lower 48 natural gas production increased from 47.5 billion cubic feet per day in 2005 to the current production of 63.9 bcf per day, an increase of 35 percent, and total U.S. production increased 30 percent.
Challenges and opportunities
Although oil production in the Williston basin increased by 630 million bpd from January 2005 to June 2012, an increase of more than 400 percent, gas production also increased by more than 250 percent to 620 million cubic feet per day in that same period. But getting the oil and gas to market presents challenges and the basin has several disadvantages, according to Bentek. For example, in 2011 Bakken producers were getting an average of approximately $11 per barrel less for their light, sweet crude than West Texas Intermediate at Cushing, Okla. Harsh winters pose another problem and can result in drilling and completion difficulties and natural gas producers are further constrained by insufficient gathering and processing capacity. Distance to markets was also noted as a challenge by Bentek.
But on the upside, there still exists significant revenue potential for companies willing to invest in gas infrastructure, and strong oil and gas economics make the play attractive to producers and transportation companies. According to the Bentek report, there are currently plans for six major oil pipeline expansions, nine rail expansions, three proposed refineries, one refinery expansion, three gas and liquids pipelines and four gas processing plants.
To access a complete copy of this report, please click here.