MDU Resources' Natural Gas "Dakota Pipeline" Update - March 2014

March 28, 2014 Kirk Eggleston

Bakken Natural Gas Pipeline to Minnesota - WBI Energy

The open season for MDU Resources' natural gas "Dakota Pipeline" will end on May 30th, but the project may not have any legs. In a Reuters report, company officials indicated at a New Orleans energy conference in March that they are currently lacking enough binding commitments for the project. The company began it's open season on January 30th for the $650 - $700 million project, which is intended to transport natural gas through North Dakota to interconnection points in Northwestern Minnesota.

“We’re encouraged by the reaction of the marketplace, but I’d be getting ahead of myself if I said we’re ready to build. We need some binding commitments.”

— Dave Goodin, MDU's CEO

WBI Energy, a subsidiary of MDU Resources, revealed in a press release in January that construction on the proposed pipeline could begin in 2016, with a completion date of 2017. Despite the lack of current commitments, Goodin is encouraged about the pipeline, but admits in the Reuter's report that the challenge is for the marketplace to see that far in advance. The natural gas rig count in the Bakken has held flat at -0- for some time, and the price of natural gas since the beginning of 2014 has hovered between $4 - $6/mmbtu.

The pipeline makes sense for the region from a flaring standpoint according to the North Dakota Industrial Commission (NDIC). Currently, ~30% of all natural gas produced in the state is flared, and without effective infrastructure in-place, no other economically viable choice exists for companies targeting the oil rich Bakken Shale.

Hess To Begin Selling Bakken Natural Gas from Tioga Plant

March 17, 2014 Kirk Eggleston

Hess announced in March 2014 that it will begin selling natural gas from its Tioga, North Dakota, plant. According to the company, expansion plans for the plant have been delayed due to poor weather conditions.

In a Reuters article, Hess spokesman, John Roper, said, "due to the unusually harsh winter weather, we're slightly behind our initial plans, but we expect to start selling residue gas this month."

The recent upgrade to the Tioga plant includes additions to ethane recovery, full fractionation and sales of natural gas liquids, according to Hess filings with the U.S. Securities and Exchange Commission. At the beginning of the year, the company earmarked $350 million for the expansion of the plant.

According to the North Dakota Industrial Commission (NDIC), in the first part of this year, ~100 wells in North Dakota had to be shut down to reduce flaring. In the liquids-rich Bakken Shale, that resulted in an impact on oil production. The Hess plant expansion could help alleviate the flaring issue, and bring some of the wells back online. The company is hoping to meet revised production estimates of 250M cf/day over the next 12-24 months.

North Dakota's oil production rose by about 6,500 b/d to about 935,000 bpd in January 2014, Department of Mineral Resources data showed last week. Output in December dropped by 50,000 bpd from the month before.

Hess Tioga, North Dakota Plant Expansion Highlights

Hess announced that it would begin selling natural gas from its Tioga, North Dakota plant in March 2014
Weather delayed the expansion
Hess planning to meet revised production estimates of 250M cf/day over the next 12-24 months

Koch Cancels Proposed Bakken Pipeline - Dakota Express Pipeline

January 22, 2014 Kirk Eggleston

The "Dakota Express Pipeline", proposed in June 2013 by Koch Pipeline, will not be built according to a Bloomberg report. The project included a 250,000 b/d pipeline to transport oil out of the Bakken in Western North Dakota to receipt points in Illinois.

With production in the Bakken, nearing 1 million b/d, the need for pipelines is only increasing. Although it is not known why the company decided to axe the project, Company Spokesman, Jake Reit, did confirm the decision to Lynn Doan with Bloomberg, saying:

"the non-binding open season for the Dakota Express Pipeline is no longer being pursued"

Pipeline companies prefer to have long-term, binding commitments for capacity. If commitments do not reach a certain point, the project will be called off. As a very loose rule of thumb, pipeline companies look for commitments of 60% or more of designed capacity before they move forward. In this case, that could mean Koch failed to receive commitments for 150,000 b/d.

This isn't the first proposed pipeline to get canceled: Oneok canceled plans for the Bakken Crude Express Pipeline in late 2012.

The Koch cancellation is surprising considering there is more than 500,000 b/d of oil moving by rail out of the basin today.

Bakken Oil Express Pipeline Approved by the North Dakota PSC

January 6, 2014 R.T. Dukes

The North Dakota Public Service Commission (PSC) approved the siting permit for the Bakken Oil Express Pipeline between Killdeer and Dickinson. With the permit, construction can begin immediately.

The pipeline is expected to cost $14 million and replace as many as 825 tanker trucks per day on Highway 22.

The 16-inch, 38-mile pipeline will have capacity to move 165,000 b/d and could be built in as little as 12 weeks. The line will originate at a truck unloading and pumping facility near Killdeer and deliver oil to the existing Bakken Oil Express rail facility near Dickinson.

View the full news release at psc.nd.gov

Alliance Pipeline's Tioga Lateral Is Online & Moving Gas Onto Its Mainline System

December 6, 2013 R.T. Dukes

Alliance Pipeline's 80-mile, 12-inch Tioga Lateral pipeline came into service in September and is moving Bakken gas onto the Alliance mainline.

The pipeline was constructed over a period of a little less than a year at a cost of $170 million.

The pipeline adds much needed high btu, wet gas pipeline capacity out of the basin. The lateral has capacity to move ~126 mmcfd from Hess' Tioga Processing Plant to the company's mainline system near the Canadian border.

The system was originally supported by an agreement with Hess to move 61.5 mmcfd for ten years.

The Alliance system has capacity to move 1.6 Bcf/d of high btu gas out of Western Canada to Chicago.

The Tioga lateral is the second pipeline from the Bakken that ties into the system. As much as ~250 mmcfd can now move into the system through the Tioga Lateral and Pecan Rose Pipeline.

Read the full press release at alliancepipeline.com