North Dakota Bakken Shale infrastructure projects reach $3 billion mark

"This is an oil play," he said. "When you're getting less than $4/Mcf for [gas] and you're getting over $80[/barrel] for oil there's a huge push to get the oil out of there."

A number of midstream companies have projects under way to capture the gas produced in association with Bakken oil, Hicks said. "Five gas plants are being constructed or are in the early phases of getting started," he said.

Under state regulations "gas produced with crude oil from an oil well may be flared during a one-year period from the date of first production from the well."

After the first year, "flaring of gas from the well must cease and the well must be capped, connected to a gas gathering line, or equipped with an electrical generator that consumes at least 75% of the gas from the well."

Justin Kringstad, director of the North Dakota Pipeline Authority, said Friday that gas infrastructure projects being proposed or built in the play "to the tune of $3 billion" include new gas processing plants and expansions to existing plants, two NGL pipelines and adding compression on the North Dakota intrastate gas system.

BAKKEN PLAY'S SIZE A FORMIDABLE CHALLENGE

The effort to bring gas infrastructure into the region, however, faces a number of formidable challenges, the greatest being "the sheer size of the Bakken play," Kringstad said. "This isn't like a traditional oil play," he said. "The footprint of the play itself is adding a challenge that no one's really dealt with before."

Kringstad also pointed out that infrastructure companies have to contend with the North Dakota winter conditions, and he noted that North Dakota had experienced a particularly wet spring, resulting in flooding in many parts of the state that lasted into the early part of the summer.

Kringstad said there already has been a surge in the construction of gas processing infrastructure in the state over the past five years. From a base of less than 200,000 Mcf/d in capacity at the outset of the play's development in 2006, processing capacity is expected to increase to top 1 Bcf/d by next year, he said.

The greatest infrastructure hurdle will be creating a gathering network to link together the myriad, far-flung oil and gas producing assets and "getting the well connections put in place," Kringstad said.

"The challenge is going on at the rigs, from leasehold to leasehold. We're still very much in the infancy of this play. There's a whole lot [of] growing that needs to be done and as these leases get secured, [and] we're going to transition into the development of the play. It's going to come," he said.

Some critics, citing both the economic and environmental downsides of the practice, question whether North Dakota producers should be permitted to flare gas at all.

"A big question about flaring is how efficient it is, how much of the components are combusted," said Amy Mall, a senior policy director of the National Resources Defense Council.

"It is seen as an improvement over venting but it's not a solution," Mall said.

--Jim Magill, jim_magill@platts.com

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