In typical boom town fashion, the oil production in North Dakota took off in late 2010 as technological advances in shale exploration and fracturing became widespread. Nearly increasing their production fivefold to 1.13 million barrels per day in 2014, the state was forced to deal with large amounts of flared, associated gas. North Dakota’s Industrial Commission put in place targets to decrease the amount of flared gas beginning in 2015, but due to sustained rapid growth, the state is reconsidering their aims.
North Dakota has revisited their flaring and natural gas capture goals multiple times since the initial proposal in the beginning of 2014. Originally the state set a flare rate of 22 percent of produced gas but has revised future values based on rapid population growth paralleling the growth of the state’s energy industry. Currently one fifth of the associated gas is flared due to lack of infrastructure. Given the Bakken‘s 5.9 billion barrels of proved crude reserves and high initial rates with increasing gas oil ratios, the flared gas could potentially be a sizeable added cash flow.
The initial capture rate set at 78 percent was planned to fall to 15 percent at the beginning of this year. Given the sustained oil glut, low trading prices and rapid growth without improved infrastructure, this has postponed the drop in flaring until November 2016. Combined flared gas in North Dakota is roughly 107 billion cubic feet from 2007 to 2013 and reached 0.35 billion cubic feet per day by 2014. Sounding calls for better capture processes and better environmental controls, groups like Friends of the Earth are calling for an earlier and larger decrease in flaring.
Even with rig counts low during the sustained oil surplus, Bakken wells have witnessed increased productivity with an added 20 thousand cubic feet per day natural gas increase. Current wells connected to gathering lines have been able to meet the 15 percent flaring goal but those not connected do not have the available infrastructure to deal with high gas volumes. Rapid growth has outpaced the ability to install large compressor systems and storage facilities for the associated gas to await processing. While North Dakota’s processing plant capacity has reached 1.6 Bcf per day, the ability to remove and contain natural gas plant liquids from the wellhead wet gas is still far behind. These factors are working against the flaring deadline, another major reason for the delay.
While drillers in the Bakken have continued to find ways to produce cheaply, the oil glut has hit North Dakota hard. North Dakota’s economy was down 10.4 percent in the first quarter of 2015 and another 1.2 percent during the second quarter according to the Bureau of Economic Analysis. Karl Kuykendall, Economist at IHS stated, “quite simply, the North Dakota economy has been devastated by the dramatic drop in oil prices.” Facing a $3.5 billion deficit, it is unlikely that many pipeline, storage, and processing infrastructure improvements will be made, further delaying the drop in flared gas for the state.