Bakken Price and Fundamentals

Updated September 17, 2024

Bakken crude price differentials and production have been relatively stable over the past 12 months. However, an increase in gas production and the lack of gas takeaway capacity is an emerging threat to Bakken crude production.

Recent News:

• (July 30, 2024) - Kinder Morgan plans to convert the 88,000 bbl/d Double H crude oil pipeline from the Bakken to NGL service by Q1 2026

• (February 22, 2024) - Chord Energy's acquisition of Enerplus for $3.8 billion, forming the Bakken Shale's biggest producer, will boost its output to 287 MBoe/d and create an $11 billion enterprise with nearly 1800 undeveloped locations breaking even at $60/Bbl oil prices

• (January 19, 2024) - Bakken oil production in North Dakota grew last year, pushing total output to 1.3 MMBbl/d, driven by a surge in drilling rigs and the use of drilled but uncompleted wells (DUCs) from 2019
  • Enverus increased its annual forecast for US oil production growth to 1.2 MMBbl/d due to the Bakken's performance, although they do not expect this growth trend to continue, citing current rig counts
  • While oil production may face challenges in sustaining growth, natural gas production in the Bakken is on the rise, testing the limits of existing pipeline and processing capacity and prompting concerns over takeaway capacity 
• (June 21, 2023, NGI) - Bakken Shale oil producers, enduring low natural gas prices, may find respite as projects to increase basin takeaway capacity advance. Key projects include Kinder Morgan Inc. and TC Energy Corp.'s plan for 430,000 Dth/d of natural gas transport capacity from the Bakken Shale, aiming for a 2026 start, and WBI Energy Inc.'s Grasslands South Expansion Project, due later this year. Despite low prices, North Dakota saw a 2% month-on-month gas production increase and a 1% oil production rise in April.

• (February 3, 2023, Argus) - The Army Corps is expected to release a long-anticipated environmental review of the Dakota Access Pipeline (DAPL) this spring. Opponents of the pipeline were in a battle in the courts even before the DAPL's commissioning in 2017. After the Army Corp EIS study is complete, a 45-day public comment period ensues. The final version of the EIS will lead to a record of the decision on the easement from the Army Corps, which could have consequences for the pipeline, according to the Harvard Law School's Environmental and Energy Law Program (EELP).

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September 17, 2024 - Oil prices in the Bakken usually trade at a discount to WTI. The Bakken-WTI spot spread has seen support recently, trading at a premium due to a widening Brent-WTI spread. This trend is driven by the increased incentive to ship Bakken barrels south to the Gulf Coast, especially as the Brent-WTI differential rises, making Bakken crude more competitive. Since differentials flipped to a premium, prices have been relatively stable at around $2/Bbl. However, it is important to note that liquidity in Clearbrook forwards is extremely thin, leading to significantly wider than average bid-ask spreads. Many producers in the region opt to hedge physically rather than financially for this reason.  

Although Bakken production is slowly growing, effective crude oil takeaway capacity is much tighter than nameplate capacity would suggest, especially due to inefficiencies with rail and the Bakken North line. With key pipelines like NDPL and Pony Express expected to reach full capacity soon, DAPL stands out as the most viable option for absorbing the growth in Bakken oil production.

• ONEOK is expanding its Elk Creek pipeline capacity by 135 MBbl/d by Q1 2025. This will increase total capacity from 300 MBbl/d to 435 MBbl/d for NGLs going to Conway, Kansas
• Kinder Morgan is converting its Double H crude oil pipeline (which has a capacity of 88 MBbl/d) into an NGL service pipeline by Q1 2026. The NGL capacity is yet to be confirmed, but it’s described as "scalable." This pipeline runs parallel to ONEOK's system and provides an additional route for moving NGLs out of the Bakken

Geology The Williston Basin, compared to many basins worldwide, is a structurally simple basin. It is roughly circular, deepest in its center, and the strata become both shallower and thinner towards its margins. It is a large basin, covering approximately 150,000 square miles over parts of North Dakota, South Dakota, Montana, and parts of the adjacent Canadian provinces of Saskatchewan and Manitoba. The basin's deepest point is thought to be near Williston, ND, where the Precambrian surface is more than 16,000 feet below the surface. Crude Most of the crude oil reserves in the Bakken/Three Forks is a high-quality light sweet crude with an average API gravity of around 40. These traits make it very similar to West Texas Intermediate crude that is used for the NYMEX benchmark contract. Source: dmr.nd.gov, NGI

Source: Baker Hughes

Major Pipelines

Dakota Access Pipeline - The Dakota Access Pipeline (DAPL) is a 1,172-mile-long underground pipeline that can transport up to 750 MBbl/d of light sweet crude oil. The pipe originates in North Dakota in the Bakken formation and terminates in Patoka, Illinois. A separate Energy Transfer pipeline (ETCO) can then deliver oil to the Nederland terminal on the Texas Gulf Coast.