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Is The Shale Rebound Causing A Return Of Flaring?

Oil Rigs

Underneath the surface of North Dakota is the Bakken Formation, which is part of the Williston Basin that also lies underneath parts of South Dakota, Montana, southwestern Manitoba and southern Saskatchewan. Last week I was in Bismarck, North Dakota at the 2017 Bakken Conference and Expo. I spoke about my company’s efforts to eliminate natural gas flaring in oil fields and then drove around the state to observe the most recent drilling activity there.

The Bakken was known to contain oil for many years, but it just wasn’t economical to produce. Hydraulic fracturing and horizontal drilling changed that. Up until about 2008, North Dakota hadn’t produced much more than 100,000 barrels per day (BPD). But in 2008 the shale oil boom started to pay dividends. In late 2008, North Dakota’s oil production reached 200,000 BPD and then climbed steadily to a peak of 1.2 million BPD in late 2014.

As production in the Bakken Formation boomed, infrastructure raced to catch up. This often meant that there was insufficient takeaway capacity for natural gas that is co-produced with oil (“associated gas”). The result was a significant amount of natural gas flaring in the state, which the North Dakota government sought to address through legislation.

In early 2014, North Dakota was flaring 36 percent of its natural gas production. An article from the Energy Information Administration last year stated that the amount flared had fallen to 10 percent of the state’s natural gas production by March 2016, but that also corresponded to a period of time that oil prices collapsed (which subsequently caused drilling activity in the state to plummet).

In 2014 there were around 200 rigs drilling for oil in the Williston Basin. By March 2016, the rig count had fallen to 31. That ultimately fell to a low of 22 rigs in May 2016, but the number has since rebounded back to more than 50 rigs. That, in turn, has resulted in a small rebound in North Dakota’s oil production. Related: Is The EIA Exaggerating U.S. Oil Production?

Following my talk in Bismarck, I spent a couple of days driving around the North Dakota Bakken region to get a sense of the drilling activity in the state. According to Baker Hughes, there are currently 53 rigs drilling for oil in North Dakota, and I managed to find most of them as I drove around the state. Below are a few of my observations about the initial stages of the Bakken Shale Boom 2.0, along with some photos I took.

Let me be clear that just because a company is flaring, they aren’t necessarily doing anything in violation of the law. There are plenty of reasons companies are allowed to flare, but the gas that is flared is a wasted resource that could potentially be utilized. But I don’t want to give the impression that I am suggesting these companies are doing anything wrong.

As I drove up into the southern portion of the Bakken, the first wells I encountered in large numbers were owned by Continental Resources. I saw little to no flaring associated with the many Continental wells I encountered. The first substantial flare I encountered was on a site operated by ConocoPhillips:

(Click to enlarge)

Flare at a ConocoPhillips Well in North Dakota

As I drove further north, I took photos of probably 30 different flares like this:

(Click to enlarge)

Flare in North Dakota

There were a lot of new wells being drilled throughout the region, and a lot of hydraulic fracturing activity taking place. As a result, I saw many water lines on the ground, and I saw a lot of pumps owned by recent IPO Select Energy Services Inc:

(Click to enlarge)

Fracking Water Pump From Select Energy Services

Further north, there was a lot of activity by WPX Energy Inc. WPX had many wells in operation, and at one site they had more than two dozen storage tanks for oil and produced water (and a visible flare in the center of the picture):

(Click to enlarge)

WPX Energy Production Site Related: Saudi Oil Minister Just Did Something He Has Never Done Before

The most surprising observation to me was the level of activity being carried out by Marathon Oil Corporation. In the sweet spot of the Bakken, Marathon was everywhere. Here is one Marathon site, with a well being drilled by Helmerich & Payne, Inc.:

(Click to enlarge)

Marathon Oil Corporation Drilling Site

One company that appeared to be doing a lot of flaring was Hess Corp. I observed several prominent flares at Hess sites such as this:

(Click to enlarge)

Hess Production Site

I will close with an anecdote. The CEO of Hess is John Hess. My traveling colleague for this Bakken tour was former NFL football player Jon Hesse (currently the Sr. VP of Business Development for my company). He tells me that since he works in oil and gas, he often has to explain that he is not “that” John Hess. Maybe John Hess can call Jon Hesse about his flares.

The Bakken is undergoing a resurgence, but the current rig count is still only a quarter of the 200 rigs that were drilling there five years ago. Based on my observations, demand for oilfield services seems to be heating up in the region. There was quite a bit more flaring there than I expected, but it could simply be trending back up in response to the latest ramp-up in drilling activity.

By Robert Rapier

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  • Crosby on August 07 2017 said:
    Wow, cool pictures. Thanks for sharing!

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