Oil production in the US state of North Dakota has increased by more than a third — to 1.4m barrels a day — two years after a controversial pipeline connected it to big markets further south, bolstering the nation’s status as the world’s leading source of new supply.
The 1,172-mile Dakota Access pipeline, which runs from the Bakken shale formation in North Dakota to an Illinois oil storage and transport hub, is now “essentially full”, according to Genscape, a commodities data company.
Production growth — second only to that of Texas — is set to continue. Energy Transfer, the operator, is pushing ahead with plans to add pumps to raise the pipeline’s capacity above its original 570,000 b/d limit.
Dakota Access was “a game-changer for Bakken crude,” said Rory Sabino, vice-president at Continental Resources, whose production in the region climbed 82 per cent between the first quarters of 2017 and 2019. Energy Transfer, meanwhile, had seen a “tremendous amount of interest” in increasing the pipeline’s capacity to as high as 800,000 b/d, Marshall McCrea, its chief commercial officer, told analysts last month.
A competing route, the $1.6bn Liberty Pipeline, last week received a green light to connect the Bakken and Rockies production areas to the tank complex of Cushing, Oklahoma starting in 2021.
In the interim, some producers and merchants have hired more trains to move oil from North Dakota to distant refineries. Loadings of crude by rail fell to about 115,000 b/d soon after Dakota Access entered service in 2017 but have since surpassed 300,000 b/d, said Ryan Saxton, director of midstream oil at Genscape.
Production rose as oil prices recovered from a crash in 2014-15 and drillers grew more efficient. Even as output rises, the 55 drilling rigs active in the Bakken are less than a third of the sum four years ago.
Oil companies have introduced techniques to recover more oil from wells underground and to speed up drilling, driving down the cost of production as their shareholders demand better returns on investment.
Hess, another producer, has reduced drilling and completion costs in the Bakken by more than 60 per cent over seven years, John Hess, chief executive, told a conference last month. He forecast 20 per cent annual production growth in the region.
“It’s gone from ‘drill, baby, drill’ to ‘show me the money’,” he said.
The $3.8bn Dakota Access pipeline became a high-profile target of activists concerned it would drive up carbon emissions and of members from the Standing Rock Sioux tribe worried that an oil spill could pollute their water supply. President Donald Trump reversed the Obama administration’s freeze on the project within days of taking office in 2017, endorsing what had become a national symbol of the fossil fuel industry.
Carla Fredericks, director of First Peoples Worldwide, an indigenous rights group, said that while the pipeline had improved the economics of oil production, it risked becoming a stranded asset in the event policymakers placed curbs on greenhouse gases from fossil fuels.
“I think it’s really a short-term story,” she said. “Because these projects are so risky, both socially and environmentally, investors for the long term I think should be quite wary of this whole industry.”
Energy Transfer said it would invest $30m-$40m in North Dakota as it added pumps along Dakota Access. “Optimising capacity will enable further development in the Bakken which means more jobs and economic benefits for local communities,” it said.