Bakken oil play now branded 'mature' as industry appetites shrink in North Dakota
Production has been holding flat in North Dakota over the last year, a trend that the state's top oil and gas regulator said may be the industry's new normal.
BISMARCK — A consensus is forming among North Dakota’s top oil industry operators: the formation that drove the state’s fracking boom has entered its middle age.
“The Bakken has been rebranded — whether we want it to be or not — as mature,” said Lynn Helms, director of the North Dakota Oil and Gas Division, Monday, Feb. 14, recounting a key takeaway from conversations with some of the state's biggest oil producers at a recent industry conference in Houston.
While many oil producers still view the Bakken as "a cash cow," Helms said they aren't reinvesting resources in the formation like they once did, focusing instead on Texas and New Mexico.
Among the reasons driving the Bakken’s shifting reputation, Helms cited a surge in attention among oil industry operators on their carbon footprints, as well as some concerns about the viability of industry technology that could be needed to sustain high output from North Dakota wells as they get older.
North Dakota’s oil output dropped by about 2% in the month of December, according to industry data released on Monday, and sits at 1.14 million barrels per day. Production has hovered around that number for the better part of the last year, as North Dakota has struggled to return to its prepandemic high of 1.52 million barrels per day in November of 2019.
If the industry's approach to North Dakota holds, Helms said the state should expect to see flat or slight production growth over the next decade or so, after which output would slowly trail off as the industry continues to pump oil from its existing inventory of wells.
A common goal to eradicate natural gas flaring is an “enormous” factor in the shifting mindset toward the Bakken, Helms said. The process of burning off excess natural gas that comes up from oil wells, flaring releases planet-warming carbon dioxide emissions. With financiers increasingly factoring climate consequences into their investments, achieving a gas capture level near 100% has become “goal number one" for many oil producers, Helms said, even more than expanding output.
Oil producers in North Dakota captured 93% of their natural gas output in December, clearing the state’s regulatory standard but falling well below the average levels found in oil plays like the Permian in New Mexico and Texas, which have more infrastructure to capture and transport gas. Flaring was particularly high this December on private lands on the Fort Berthold Indian Reservation, where just 46% of natural gas was captured.
“Four years ago, visiting these same people, everyone was pounding the table, wanting” more lax flaring regulations so they could produce more oil, Helms said of the Houston visit. “In four short years that has made a complete 180.”
Justin Kringstad, director of the North Dakota Pipeline Authority, noted that North Dakota faces a growing flaring challenge, since more and more natural gas is expected to come up alongside oil as wells get older. Even if producers were looking to realize relatively small growth in the years ahead, “we’re still going to have our work cut out for us from a state and from an industry standpoint to hit those aggressive targets that operators are putting forward,” Kringstad said.
Earlier this year, federal geologists estimated that the volumes of untapped oil in the Bakken have dropped by 40% since a previous survey in 2013, but North Dakota leaders and oil industry boosters have highlighted technological strides that they predict will open new doors for production in the Bakken. These include injecting captured natural gas or carbon dioxide back into the ground to increase pressure and juice the production of declining wells, a process known as “enhanced oil recovery.”
But Helms said the changing outlook on the Bakken also reflects some industry concerns about how effective those advancements could be.
While major oil companies have shown “a significant amount of interest” in enhanced oil recovery, “there are some real concerns about physically whether it’s possible to get that additional oil” out of formations like the Bakken, Helms said.
Low oil inventories worldwide, as well as tensions between Russia and Ukraine, have lately driven U.S. prices to some of their highest levels in a decade, surpassing $95 per barrel on Monday. But while those prices would historically have spurred higher drilling levels in the Bakken, Helms said the industry is anticipating more modest investments over the next year.
Readers can reach Forum reporter Adam Willis, a Report for America corps member, at email@example.com .