Expansion project looks to boost Bakken production, squeeze out Canadian exports

North Dakota gas production appears poised to grow with the approval of WBI's North Bakken Expansion Project, which could propel AECO higher as Canadian producers look to boost exports further before being squeezed out this summer.

Bakken dry gas production is slated to see steady growth this summer after falling off in the two months since the start of winter. Output had stagnated at less than 2 Bcf/d midwinter amid likely freeze-offs, after declining from an estimated average of 2.14 Bcf/d in November, according to S&P Global Platts Analytics data.

However, Platts Analytics forecast the Bakken to see consistent gains through this summer and enter winter 2022-23 at 2.26 Bcf/d. The possibility that oil prices will hold at elevated levels, as well as expanded takeaway infrastructure coming online in WBI Energy's North Bakken Expansion Project, could be conducive to growth.

The project will transport associated natural gas from the Williston Basin to a new interconnect with Northern Border Pipeline's existing mainline in McKenzie County, North Dakota. It will have the capacity to transfer up to 250 MMcf/d.

Bakken production gains could displace more Canadian supply from entering the Midwest on Northern Border Pipeline to alternative routes and likely flow on Great Lakes or Viking. On the other hand, added Bakken production could back up Western Canadian supply and result in stronger inventories in Alberta, which could ultimately place pressure on AECO cash basis this summer.

The North Bakken Expansion Project received final US Federal Energy Regulatory Commission approval Jan. 27, setting the stage for more Bakken production to reach Northern Border at the expense of AECO. While losing market share on a key outlet to the US Midwest is decidedly bearish for AECO in the long term, it could boost the Western Canada benchmark hub in the near term. The expansion has the potential to allow an incremental 250 MMcf/d of Bakken production to reach Northern Border.

In October and November, in the most recent data available from the North Dakota Industrial Commission, the Bakken flared 177 MMcf/d of associated gas at the wellhead. Some of this may now find its way to Northern Border. Some of it could be new production that reaches Northern Border as well, according to Platts Analytics. North Dakota producers have increased total production while further limiting flaring over the past several months.

If AECO loses market share on Northern Border from WBI's expansion, this would reduce the amount flowing through the East Gate and down to Northern Border and help AECO strengthen in the near term as it reconnects to Chicago. In the long term, however, this will be a bearish development for AECO. The loss of Canadian exports to the US on Northern Border means AECO will need to push more gas to the Midwest on the relatively more expensive Great Lakes Pipeline system, which will put pressure on AECO, according to Platts Analytics.