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Transportation challenges still face ND oil, gas industry

MINOT, N.D.—By the mid-2020s, North Dakota will need additional natural gas transportation systems out of the region, according to the head of the North Dakota Pipeline Authority.

"Whether that's an expansion of existing systems or that's a new pipeline built out of the region, the current gas transmission network is not going to be adequate long term," said Justin Kringstad, N.D. Pipeline Authority director.

Kringstad, of Bismarck, spoke to members of the Minot Area Chamber of Commerce's Energy Committee on May 30.

The N.D. Pipeline Authority is a non-regulatory agency that specializes in providing data analytics and production forecasting for the transportation and processing industry in the state. It was created in 2007 to diversify and expand North Dakota's economy by facilitating development of pipeline facilities to support the production, transportation and use of North Dakota energy-related commodities.

According to the most recent numbers available from 2016, North Dakota has more than 26,000 miles of crude oil and natural gas pipelines.

"This is an industry that has been very, very active," Kringstad said. He said 2012 was the highest year for pipeline construction in the state when 3,184 miles of petroleum pipelines were constructed. The following year — 2013 — 2,828 miles of pipelines built.

Kringstad said the downturn in drilling and well completions in recent years also was a slowdown for pipeline construction. He said pipeline construction this year is expected to be similar to 2017.

Natural gas production in North Dakota hit another record high in March, when the state produced 2.1 billion cubic feet a day of natural gas, according to preliminary figures.

Kringstad said North Dakota, producing 2.1 billion cubic feet a day of natural gas, is a relatively small producer of natural gas compared to the Marcellus in eastern U.S. and in the Gulf Coast.

The Permian Basin in Texas and New Mexico is producing 7 billion cubic feet of natural gas per day and is projected to increase to 15 BCF/d by 2035, according to a recent story on the Kallanish Energy Daily News & Analysis website.

As for flaring, Kringstad said there's a misconception that natural gas is being flared at a well because there isn't a pipeline. He said in some cases, there is pipeline connection but it doesn't have adequate space.

Currently, 88 percent of the natural gas is being captured and only 2 percent of the gas is being flared from wells that don't have pipeline connection, Kringstad said. The remaining 10 percent is being flared from wells having challenges on the existing infrastructure.

As of Thursday, the North Dakota Oil and Gas Division reported 60 rigs were actively drilling in North Dakota.

North Dakota is part of the larger basin — the Williston Basin, an area in North Dakota, eastern Montana and a portion of South Dakota — and around 1.2 million barrels of oil a day needs to be moved to markets.

Two major forms of transportation are used to move North Dakota's oil to market: rail and pipelines.

"At one point over 70 percent of North Dakota's oil was being moved by rail car," Kringstad said.

At the peak, he said over 20 loading facilities existed for trucks to pull up to them and the crude was pumped into rail cars.

"Many of those smaller facilities have now gone away," Kringstad said. He said those operating are connected to the larger pipelines, adding that around 10 loading facilities are still actively operating.

Looking at historical oil production and today's oil production, he said future oil production in North Dakota looks optimistic.

Kringstad said the major pipeline companies are working to figure out if there is an opportunity for further expansion and if a new pipeline system needs to be built while the railroads are looking at opportunities for them in the future.

"A lot of things are going to continue to be very active in this phase as we continue to march forward in the next several years as the industry tries to work through how it's going to proceed with this transportation challenge," Kringstad said.