Natural gas headed in ‘positive direction’

WILLISTON, N.D. – In one month, North Dakota wastes a resource capable of heating about 80,000 homes for one year.

But new processing plants and pipelines to keep natural gas from being flared have recently come online or will be completed soon. That could make 2013 the year North Dakota starts to turn that around, says Justin Kringstad, director of the North Dakota Pipeline Authority.

“All things are aligning in a very positive direction,” Kringstad said.

Every month, Kringstad monitors how many new wells are connected to natural gas gathering lines.

With a lack of infrastructure and rapid oil development in North Dakota, the state developed a backlog of wells that need to be connected to gathering lines, he said.

The American Gas Association says 1 billion cubic feet of natural gas can meet the needs of 10,000 to 11,000 American homes for one year.

In March, the state flared about 7.8 billion cubic feet of natural gas, or 29 percent of the state’s output, according to the Department of Mineral Resources. North Dakota flared a historical high of 36 percent of its natural gas output in September 2011.

Kringstad said he expects the percentage of natural gas flared to come down as the state catches up to the new wells and is able to begin working on the backlog.

“Everyone’s optimistic that things are starting to line up properly, that the pace has been increasing,” Kringstad said. “A lot of great things are going to continue to happen over the next year to three years.”

Milestones

One significant milestone this spring was the completion of ONEOK’s Stateline II natural gas processing plant near Williston, which can process 100 million cubic feet of natural gas per day. It’s the third natural gas processing facility the Oklahoma-based company has completed in the Williston Basin since late 2011.

Later this year, Hess Corp. will complete a major expansion of the Tioga Gas Plant, which will increase capacity from 115 million cubic feet per day to 250 million cubic feet per day. The plant produces propane, butane and natural gas.

With the addition of other plants that are expanding or under construction, North Dakota will have the capacity to process nearly 1.2 billion cubic feet of natural gas per day by the end of 2013 and more than 1.4 billion cubic feet per day by the end of 2015, according to Kringstad’s numbers.

That means North Dakota would have enough processing capacity for all the gas produced, but the ongoing challenge is having enough gathering lines to transport the natural gas, Kringstad said.

ONEOK also recently completed its Bakken NGL pipeline, capable of transporting 60,000 barrels of natural liquids per day, that extends 600 miles from processing plants in the Williston Basin to an interconnection in Colorado. From there, natural gas liquids are delivered to storage facilities in central Kansas.

In addition, ONEOK is constructing a 270-mile natural gas gathering system that is expected to be fully operational by the third quarter of this year. The pipeline network will transfer natural gas from well sites in Divide County for processing at the company’s Stateline I and Stateline II plants near Williston.

WBI Energy, a subsidiary of MDU Resources Group, announced this week a proposal to build a 400-mile natural gas pipeline from the Williston area to western Minnesota.

The project, estimated to cost $650 million to $700 million, would be capable of transporting about 400 million cubic feet of natural gas per day and could be expanded to transporting 500 million cubic feet.

If WBI gets commitments from natural gas producers and secures regulatory permits, construction of the pipeline could begin in early 2016.

More gas on the way

The importance of capturing the natural gas will only continue to grow as the oil play matures. According to a recent study by Bentek Energy, Bakken and Three Forks wells will produce significantly more natural gas as they age.

In March, North Dakota’s increase in natural gas production was about triple the increase in oil production, said Lynn Helms, director of the Department of Mineral Resources.

“As the wells mature, there’s more and more gas production coming out of those wells,” Helms said.

Kringstad’s forecast is that North Dakota will need the capacity to process 2 billion to 2.5 billion cubic feet per day of natural gas in about 10 to 15 years.

While capturing the natural gas is a challenge now, it also provides the state with new economic development opportunities, said Department of Commerce Commissioner Alan Anderson.

“We’re on the threshold of a future where energy development in all of the sectors has the potential to not only grow, but also develop new economies,” Anderson said.

Prime examples are the $1.4 billion CHS fertilizer plant planned near Spiritwood and the $1.5 billion Northern Plains Nitrogen plant in Grand Forks that would convert natural gas into fertilizer, Anderson said.

“What’s beautiful about that is it ties two of our premier industries, agriculture and energy, and it brings a value-added side to it from the energy side,” Anderson said.

North Dakota lawmakers recently approved new legislation that will provide incentives for capturing the natural gas and approved a study of using natural gas in motor vehicles.

Legislators also increased funding in the Oil & Gas Research Program from $4 million to $10 million per biennium, with emphasis placed on value-added processing projects, Anderson said.

The Department of Commerce also has a lot of interest from companies interested in opportunities related to natural gas, Anderson said.

“That’s what’s exciting,” Anderson said. “What can be viewed as a problem really is going to be an opportunity for the state.”

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