Oneok's Bakken NGL Pipeline & Stateline Processing Plant Open

Oneok Bakken Investments

Oneok Partners recently announced the opening of two major growth projects in the Bakken. As of April 9, 2013, both the Bakken NGL Pipeline and the Stateline II natural gas processing plant are running. When fully complete, the projects will account for as much as $800 million in investments.

The opening follows a recent announcement of plans to build a $325-360 million Garden Creek III plant. You can read more about the latest expansion in the article Oneok's Bakken Processing Expanding Through Garden Creek III

Bakken NGL Pipeline

The Bakken NGL Pipeline is a $450-550 million, 600-mile pipeline from the Williston Basin to an interconnect with the Overland Pass Pipeline in Colorado. The pipeline has the capacity to move 60,000 b/d of unfractionated NGLs and will ultimately move 135,000 b/d once additional pump stations are installed. The pump station installations will be completed in the third quarter of 2014 and have a price tag of $100 million.

"The Bakken NGL Pipeline is the first pipeline to transport natural gas liquids from the Williston Basin to NGL fractionation and storage infrastructure in the Mid-Continent and Texas Gulf Coast," said Terry K. Spencer, president of ONEOK Partners. "This project and our continued investments in the Williston Basin reflect our commitment to provide producers with the essential NGL infrastructure needed as they continue to develop the Bakken Shale and Three Forks formations."

Stateline II Natural Gas Processing Plant

The Stateline II plant is a $135-150 million, 100 mmcfd processing plant in Western Williams County, ND. The plant represents the fourth of six processing plants planned or in operation. Oneok's processing capacity is now 390 mmcfd and will ultimately grow to 590 mmcfd in the first quarter of 2015.

"The completion of Stateline II, along with our other two plants and associated infrastructure that are operational, will reduce the flaring of natural gas in the region, enabling producers to deliver natural gas to customers and improve the environment," Spencer added.

This leaves only two of the six plants remaining to be completed. The Garden Creek II and III plants are under construction in eastern McKenzie County, ND.

1. Grasslands (90 mmcfd)
2. Garden Creek I (100 mmcfd) online December 2011
3. Stateline I (100 mmcfd) completed September 2012
4. Stateline II (100 mmcfd) expected April 2013
5. Garden Creek II (100 mmcfd) expected completion Q3 2014
6. Garden Creek III (100 mmcfd) expected completion Q1 2015

CenterPoint - XTO Sign Long-Term Crude Oil Gathering Agreement

Pipeline Construction

CenterPoint Energy has signed a long-term agreement to gather crude oil production for Exxon's XTO Energy subsidiary in Dunn and McKenzie counties. The system will include a 14-mile, 8-inch mainline, with 3-inch to 6-inch gathering lines. Total design capacity will be 19,500 b/d.

The gathering system will deliver oil to Great Northern Gathering and Marketing's Watford Terminal. The volume committed by XTO was not released, but operators were required to commit 5,000 b/d or more to receive the best rates.

"We are extremely pleased to provide long-term crude oil gathering services for such an outstanding producer, and we appreciate the confidence they have placed in our current and expanding capabilities," said C. Gregory Harper, SVP and President of CenterPoint Energy's Midstream business. "Our excellent track record of developing gathering systems on time and on budget continues to provide us with opportunities, and positions us to execute our strategy of expanding into liquids-rich basins."

Hiland Partners Planning New Bakken Oil Pipeline

Pony Express Crude Oil Pipeline Segment

Hiland Partners is planning a new Bakken pipeline from Dore, ND, to Guernsey, WY. The Double H Pipeline will connect with the Pony Express Pipeline in Guernsey and crude will ultimately be moved to Cushing, Oklahoma.

The ~460-mile, 50,000 b/d pipeline has an estimated price tag of $300 million. The 12-inch line will have the ability to expand to 100,000 b/d if needed.

"That`s a new line of business, long-haul interstate crude oil transportation, that we`re getting into," said Derek Gipson, Hiland Partners executive vice president and chief financial officer. "We expect that line to start moving barrels in late 2014. Construction will kick off in the back half of this year. That`s a key project for us to execute on."

The Hiland executive also believes that oil will see better pricing at Cushing.

The Pony Express pipeline is being converted from natural gas to oil and will be extended to Cushing, OK. It's conversion will alleviate congestion that has often cause Rockies crude oil prices to trade at discounts of more than $20 to WTI.

Read more at enidnews.com

Hiland Partners, LP is a midstream energy partnership engaged in purchasing, gathering, compressing, dehydrating, treating, processing and marketing of natural gas and the fractionating, or separating, and marketing of natural gas liquids, or NGLs. The company was founded by Continental Resources CEO and chairman Harold Hamm.

Bakken Takeaway Capacity Sufficient, But Pipes Likely

Bakken Takeaway Capacity

Bakken takeaway capacity is sufficient for the next couple of years, but production growth will lead to more pipelines in the long-term. Pipelines provide the cheapest and safest mode of transportation for oil. Current price differentials across the country allow operators to realize better netbacks by moving oil by rail to places where prices are better than say Cushing, Oklahoma, where WTI is priced. The price benefit outweighs the cost of moving crude by rail, so operators aren't pushing for more pipes at the moment.

Rail provided more than 60% of oil transportation out of the Williston Basin in early 2013. Approximately, 20 rail loading facilities have the capacity to move 700,000 b/d out of the region. A total of 583,000 b/d can be moved to refineries in the area or out of the basin by pipeline. Enbridge's Latest Bakken Pipeline Expansion brought pipeline capacity over 500,000 b/d by adding approximately 120,000 b/d of capacity into Canada.

With oil production estimated at 800,000 + b/d in the area, there is ample takeaway capacity - (~1.3 million b/d = 700,000 b/d of rail + 583,000 b/d of current pipeline and refinery capacity).

The Dakota Prairie Refinery will add an incremental 20,000 b/d demand when it is completed in 2015, bringing pipe and refinery capacity to more than 600,000 b/d.

Bakken Pipelines Canceled

Oneok canceled the Bakken Crude Express pipeline in the fourth quarter of 2012, but the main reason was a lack of interest. Interest waned as operators began realizing better prices by moving oil by rail. The pipeline would have delivered oil to Cushing, OK, and the best prices in the US simply aren't near Cushing. Operators are increasingly moving Bakken Crude to locations along the coasts where refineries are offsetting imports with Bakken crude. Prices closer to Brent ($110/bbl in early April), compared to WTI ($96/bbl), can be realized along the coasts.

Keystone XL, if it is ever approved, will add to the regions pipeline export capacity, but one of two things will need to happen if other pipelines are going to be built:

1. WTI prices need to improve in comparison to world benchmarks, so pipelines south become attractive or
2. Production will need to grow to a level that supports a large, long distance pipeline that bypasses Oklahoma for better prices elsewhere

The future of pipelines out of the basin will be a fun story to follow. If production continues a growth trajectory like we saw in 2012, it's not a question of will more pipelines be built, but when will they be built.

Dakota Prairie Refinery Groundbreaking - MDU Resources

Dakota Prairie Refinery Groudbreaking Governor Dalrymple

A partnership between MDU Resources and Calumet Specialty Product Partners broke ground on the Dakota Prairie Refinery on Tuesday.

The 318-are site where the refinery will be built sits just west of Dickinson in Stark County, ND. Construction is expected to take less than two years and will employ 400-500 people at the peak. Ongoing operations will employ approximately 100 people. Those are stable Bakken Jobs that will be around for decades to come. Hiring and training of operating personnel is expected to begin in 2013.

"Bringing this project from concept to construction took the effort of a great many people," said David L. Goodin, president and chief executive officer of MDU Resources. "We especially appreciate the support of Governor Dalrymple, other state officials and state agencies. Their permitting process was rigorous, but at the same time they helped us identify and solve problems that are involved in a complex project such as this."

Dakota Praire Groundbreaking Shovels

The refinery will have the capacity to process 20,000 b/d of local crude oil and will primary produce diesel. Diesel is in high demand in North Dakota and the state is challenged with a surplus of crude and a shortage of refined products. This plant will help meet strong local demand.