Global Energy Strikes, Coal Deal May Pressure Bakken Gas

Russian forces launched a "massive strike" on Ukrainian electricity plants overnight, according to a report from Rigzone. While geographically distant, such attacks on global energy infrastructure have historically contributed to volatility in worldwide energy markets, including natural gas.

Separately, Hallador Energy has signed a $700-million agreement to supply a utility operating in the Midcontinent Independent System Operator (MISO) Zone 6, Rigzone reported. The coal will be supplied from the Merom Generating Station in Indiana.

For Bakken operators, these developments underscore external market forces that can influence local economics. The Bakken formation produces significant associated natural gas alongside its crude oil. The price of that gas, and the economics of capturing versus flaring it, are sensitive to broader supply and demand fundamentals.

Increased geopolitical tension, highlighted by the attacks on Ukrainian energy assets, can lead to heightened uncertainty in European gas markets. This can have a knock-on effect on U.S. LNG export dynamics and domestic natural gas pricing benchmarks, which Bakken gas prices often track.

The long-term coal supply contract for MISO, a major regional grid, indicates continued demand for baseload power generation from fossil fuels in parts of the Midwest. Sustained coal plant operation can compete with natural gas for power generation demand, potentially applying a ceiling on gas price rallies in the region.

Ultimately, Bakken wellhead economics are driven primarily by crude oil prices. However, the value of the associated gas stream remains a key factor for operator cash flow and the state's gas capture goals. Events that pressure or support national gas prices directly impact that revenue component and the economic incentive to reduce flaring in North Dakota's oil fields.