Is The Bakken Close To Breaking?
While the Permian has experienced a drilling boom and has received tons of media attention, a lesser-known but still remarkable revival has been underway in the Bakken this year. At the same time, the increased rates of drilling in North Dakota are starting to reveal signs of strain on the basin, as drillers are increasingly forced into less desirable locations.
The Bakken was hit harder than the Permian during the oil market downturn that began in 2014, with rigs and capital diverted away from North Dakota and rerouted to West Texas. Oil production hit a temporary peak in late 2014 at 1.26 million barrels per day (mb/d), declining for much of the next two years.
However, production began to rise again in early 2017 before accelerating this year. In October, the EIA expects Bakken production to hit 1.33 mb/d, a new record high.
In some ways, the Bakken is enjoying a bit of a revival because the Permian has become overcrowded. The pipeline bottleneck, the strain on rigs and equipment, completion services, labor, water and even on road traffic has caused a lot of headaches for shale drillers in West Texas. Some shale executives have decided to shift resources elsewhere, and the Bakken has received a boost as a result.
The Bakken took over as the most profitable place for shale drillers on average this summer, at least temporarily surpassing the Permian. That may not last as the steep discounts for WTI in Midland drags down the profitability of the Permian, a situation that will resolve itself over the next few years as pipelines come online. But the improved outlook for the Bakken is notable nonetheless.
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