Bakken Boosters See Robustness Returning This Year and Next

Richard Nemec

March 6, 2017

The buzz is slowly returning to the Bakken Shale, with state and industry stakeholders eyeing a return to more robust production and bottom line numbers by the end of this year and through all of 2018.

America’s highest profile oil pipeline, the $3.8 billion Dakota Access Pipeline (DAPL) project, is a principal driver behind the renewed optimism, as exemplified by recent pronouncements from close Bakken observers.

“North Dakota could see an additional $100 million annually in added tax revenue upon completion of DAPL,” a spokesperson in the state Tax Commissioner’s Office (NDTax) told NGI’s Shale Daily, although the added tax dollars won’t follow immediately the upcoming completion of the nearly 1,200-mile, four-state oil pipeline.

Housley Carr, an analyst with RBN Energy LLC, said in a blog Monday that leading Bakken producers are talking up the prospects for big gains this year and next, but RBN Energy remains skeptical about how soon the Bakken will turn the corner.

“What is crystal clear, though, is that the Bakken’s biggest takeaway project ever — the 470,000 b/d DAPL to Illinois — is finally nearing completion and operation after a very public delay,” Carr wrote in his analysis.

On the negative side, the continued challenges from opposition efforts led by the Standing Rock Sioux and Cheyenne River Sioux tribes is awaiting yet another decision from Judge James Boasberg in the U.S. District Court in the District of Columbia Circuit, following a hearing last Tuesday on the tribes’ request to halt construction at the water crossing under a dammed part of the Missouri River, 90-feet below the bottom of Lake Oahe.

However, Carr is assuming DAPL gets built, writing that when it “comes online this spring, it will further reduce crude-by-rail volumes out of the Bakken and should help to increase the odds that production in the play will begin to rebound in earnest.”

Forecasters in the past routinely underestimated how quickly Bakken crude production would grow as producers’ ability to continuously improve efficiencies was not factored in, and Carr said they also underestimated how effectively the midstream sector would add new takeaway capacity, particularly in the Bakken’s four or five core counties.

Carr noted that per-well productivity has improved in the Bakken by 321% since 2011, and those advancements have allowed many Bakken producers to ride out the global crude oil price crash since mid-2014.

Carr concluded that Bakken production was “unlikely” to resume growth at “anywhere near the pre-2014 rate,” but more than 300,000 b/d should be flowing on DAPL over the next few months. “More than 100,000 b/d of the 470,000 b/d capacity still hasn’t been committed to by shippers. With crude-by-rail volumes already down to bare-bones levels, it looks like existing pipes will be contributing more of the barrels to fill DAPL.”

When the pipeline is full, the North Dakota tax revenue officials will be salivating, as the NDTax office spokesperson confirmed.

“The expected oil tax revenue increase likely will start to be realized within a couple of months [of DAPL service starting]. The other expected revenue increase is in property taxes, which wouldn’t be seen for at least a year at the earliest.”

West Coast Correspondent | Los Angeles, CA

Richard Nemec began writing for NGI in 1995 and has 30 years experience in the energy industry. He holds BA from the University of Southern California, Los Angeles; and a MA in journalism from Northwestern University, Evanston, IL; and completed MBA courses at Northwestern’s Evening Graduate School of Management.