N.D. output to surge, displace Canada gas: report

Tuesday, July 31, 2012

Growing natural gas output from North Dakota's Williston Basin could easily supplant Canadian supply in Midwest markets in the next few years as imports decline and capacity opens up on existing pipelines, a new Bentek Energy report shows.

In an analysis of Williston Basin gas production growth and infrastructure needs prepared for the North Dakota Pipeline Authority, Platts unit Bentek said gross gas production could skyrocket in the region from 546,000 Mcf/d in 2011 to 2.1 Bcf/d in 2017 — representing 2% of the US dry gas market in a base case scenario. Production would rise to 3.1 Bcf/d by 2025.

Oil production from the Williston's Bakken and Three Forks formations jumped more than 400% from January 2005 to June 2012, Bentek said, and would more than quadruple in its base case to more than 2 million barrels/d by 2025.

Currently, two key long-haul gas pipelines cross the Williston: Northern Border Pipeline with a capacity of about 2.4 Bcf/d, and Alliance Pipeline, carrying some 1.8 Bcf/d of liquids-rich gas.

In recent years, as Rockies Express Pipeline and Marcellus Shale gas development brought more competition to eastern US markets, Canadian producers have contracted with Northern Border and Alliance to deliver more gas into the Midwest. Both systems are heavily utilized as a result.

Increasingly, however, the Bentek analysts predicted that Canadian supply will stay north — to be used in oilsands production or eventually liquefied and exported to Asian markets.

US imports from Canada have already fallen nearly 40% from 2005 to 2011, to about 5.7 Bcf/d, and Bentek expects them to sink to about 3.2 Bcf/d by 2017.

The "superior economics of the Williston will enable producers to price-compete with upstream supply coming fromCanada and Rockies, displacing current flows on those systems," Bentek said. "Additionally, as contracts on Northern Border and Alliance roll off in the coming years, new and current shippers will increasingly gain the option to source their gas supply in the Williston."

Given the likely displacement of Canadian gas, Bentek said interstate pipeline capacity should be sufficient in the long term for Williston supply. But it warned that more gathering and processing infrastructure is desperately needed as more than 30% of gas production is North Dakota is currently being flared, according to the state's Department ofMineral Resources.

Williston gas faces stiffer competition in the Midwest from increasing supply in the Midcontinent, particularly from the Granite Wash, Mississippi Lime and Cleveland/Tonkawa plays, Bentek said. And the Marcellus itself could eventually pose a challenge, given that Bentek predicts Northeast supply to grow by more than 11 Bcf/d in the next decade.

For more information please visit Platts Website.