Bakken’s Infrastructure Grows Up

When energy folks talk about American oil plays, the Bakken shale in the Williston Basin is invariably the top topic of conversation. It was a hot play a few years ago, and is only getting better.

From the production fairway, oil and natural gas operators are pushing the boundaries outward. Continental Resources Inc., Brigham Exploration Co. and EOG Resources Inc. are expanding into western North Dakota. Whiting Petroleum Corp. is pushing into southwestern North Dakota. Others are exploring across the Montana border.

As they and new entrants continue to drill, they are putting the play on the map in a big way. By 2009, North Dakota was #4 when ranking oil-producing states. At the time, the state was flowing some 79.7 million barrels per year. By March 2010, production had increased to more than 277,000 barrels per day or nearly 100 million barrels per year.

According to the North Dakota Industrial Commission, the 112 rigs drilling in the state (at press time) were estimated to produce as much as 450,000 barrels per day in May 2010, which would average 164 million barrels per year. While the total resource base for the Bakken and the Three Forks formations is still being studied, early reports indicate some 200- to 500 billion barrels of oil in place.

As the play grows, moving oil to markets via rail and truck is still underway, but new pipelines are needed, despite the fact that pipeline capacity exceeds oil production in North Dakota. The same is true for gas pipelines.

A look at graphs of actual gas volumes at receipt points versus selected pipeline capacities shows a variety of utilization.

Alliance-Mainline is nearly full on a continuous basis, although it does have some room to spare. The Viking-TransCanada Emerson was running at half mast until March, when it ramped up to maximum, although it has since leveled off to about two-thirds capacity. The Great Lakes-TransCanada-Emerson receipt point shows major volatility throughout the latter half of 2009 and into 2010, but gas volumes increased to about 2 million dekatherms per day in May 2010, leveling at 80% utilization. The Northern Border-TransCanada-Port of Morgan facility has been underutilized since before June 2009 and continues to run at less than half capacity.

Build, baby, build!

Pipeliners are working to expand and enhance take-away capacity from the Bakken play.

It comes as no surprise that the governors of North Dakota and Montana support new infrastructure to get the valuable commodity to market and to encourage more oil production. Recently, North Dakota Gov. John Hoeven and Montana Gov. Brian Schweitzer met with TransCanada Corp. to discuss a possible “on-ramp” to its Keystone XL Pipeline for area oil producers.

TransCanada is planning an oil pipeline from northern Alberta to refineries in the Gulf Coast and would run close to the border of southwestern North Dakota and through Montana. If built, the line has a targeted service date of 2012.

Hoeven is also encouraging Enbridge Inc. to expand its pipeline capacity northward. Enbridge is evaluating its $300-million Enbridge Phase 7 project, an expansion of some 115,000 barrels per day from the Beaver Lodge looping station in northwestern North Dakota, through Stanley, to an existing portal at Berthold.

Elsewhere, Alliance Pipeline Ltd. recently completed construction of a new interconnect facility near Bantry, North Dakota, to connect to Pecan Pipeline Co.’s 12-inch, 76-mile Prairie Rose Pipeline. The new interconnect provides a much-needed route to bring gas and gas liquids from the Bakken to market. The Alliance system runs through the Williston Basin and transports rich gas, allowing liquids to be extracted at the delivery point rather than near production facilities, thus reducing processing and transportation costs for producers.

“We are bringing EOG’s gas into the Alliance system,” says Tony Straquadine, government affairs manager for Alliance. “We take that into Chicago on our Mainline system.”

EOG Resources Inc. injects gas with up to 1,500-Btu heat content. The rich gas is too high for a typical interstate pipeline, but Alliance is a dense-phase, or rich-gas, system that can take the gas to Aux Sable Liquid Products, a world-class fractionation and extraction facility.

“Coming out of North Dakota, that system is like a garden hose coming into a fire hydrant,” he says. Alliance Pipeline operates at 1,900 pounds of pressure, keeping the liquids entrained as gas, and moves 1.6 Bcf per day on average through a 36-inch line—hence the analogy. EOG has firm commitment of 40 million cubic feet per day on Alliance this year, but it will up that to 80 million in 2011.

“We are custom-made for the North Dakota producers,” Straquadine says. “You could argue that they could put in small processing facilities and process the liquids out near the field, but then how do they move their liquids? We take it whole to Chicago. Beyond the capacity that EOG has committed, we have 108 million cubic feet available to attract incremental associated-gas volumes out of the Bakken.”

The Alliance system was built 10 years ago to serve producers in British Columbia and Alberta to drive the rich gas into the processing facility in Chicago. “Now we have that new entry point in Bantry, North Dakota. Right place, right time,” he says.

More pipelines
In addition to the previously described pipeline, TransCanada plans to begin construction of the 30-inch, 302-mile, Bison Pipeline this summer to connect gas production in the Powder River Basin of Wyoming to Northern Border Pipeline in Morton County, North Dakota. The initial capacity of 477 million cubic feet could be expanded to 1 Bcf. It is set to come online in November.

Williston Basin Interstate Pipeline Co. (WBI), the wholly owned gas transmission pipeline subsidiary of MDU Resources Group Inc., plans to expand its existing gas pipeline capacity by 33% in the Bakken in northwestern North Dakota. The expansion will add up to 30 million cubic feet per day to existing volumes for delivery to Northern Border Pipeline by adding facilities to an existing compressor station in northwestern North Dakota. The targeted in-service date is November 2011.

Along with the pipeline expansion project, WBI is also working with gas producers and processors to add additional natural gas receipt points to its system throughout the Bakken production area. An open season for the Bakken Expansion Project runs through June 2, 2010.

Bridger Pipeline LLC plans to extend its North Dakota oil pipeline transportation system. Shippers will transport oil from an origin near the town of Four Bears, North Dakota, to Belle Fourche Pipeline’s Skunk Hill Junction and to Bridger Pipeline’s Fryburg Station, the origin of Bridger’s Little Missouri Pipeline. The new extension of the system is targeted to be in service during first-quarter 2011 with an initial capacity of 40,000 barrels per day

Enbridge Pipelines (North Dakota) LLC plans to proceed with its previously deferred Phase 6 expansion work west of Beaver Lodge Station in response to recent increases in receipts at its Alexander and Trenton stations, growing production in the area and significant interest expressed by customers. New pumping upgrades will increase capacity of the company’s Alex and Trenton stations, from 93,000 barrels per day to about 127,000. The work will be completed in 2011. Enbridge recently completed a non-binding survey of interest for its Phase 7 development of additional pipeline capacity with priority transportation service from Beaver Lodge Station into Berthold, North Dakota, and from there into Cromer, Manitoba.

Rail terminals
In April, NuStar Energy LP’s St. James, Louisiana, terminal unloaded its first rail car shipments of Bakken crude from North Dakota. The company invested $2 million in its St. James facility so it can accept oil by rail in an effort to bring new sources of crude oil to an area that is quickly becoming the nation’s leading crude trading hub.

Through its manifest-rail expansion, NuStar will have the ability to bring in 10,000 barrels per day as Bakken production.

Meanwhile, U.S. Development Group LLC began construction on its new St. James Rail Terminal, an oil and condensate train-handling and distribution hub in the Gulf Coast region of Louisiana. The St. James facility is the company’s first crude oil and condensate terminal. It will be developed in partnership with Plains All American Pipeline LP.

Served by the Union Pacific Railroad, the St. James Rail Terminal will be able to handle both manifest and unit-train shipments serving various oil-producing areas in the U.S and Canada, including the Bakken. The facility, with an initial capacity of 65,000 barrels per day, will include several miles of rail track and a fully automated 26-spot rail rack and is expected to be in full operation by summer.

Gas plants

North Dakota has eleven gas processing plants operating within the state, but more capacity is on the way.

North Dakota has eleven gas processing plants currently operating within the state, but more capacity is on the way.

Oneok Partners will invest more than $400 million in new growth projects in the Bakken shale The company plans to add 100 million cubic feet per day of gas processing at its proposed Garden Creek plant in eastern McKenzie County, North Dakota. The facility and related expansions are estimated to cost from $150- to $210 million and will double the partnership's gas processing capacity in the Williston Basin by fourth-quarter 2011.

In April, Hess Corp. filed a letter of intent with the North Dakota Public Service Commission to expand its Tioga gas plant, currently the largest and oldest gas processing plant in the state. The expansion will more than double current throughput with new nameplate capacity of 250 million cubic feet per day. Hess plans to begin construction in March 2011 and have the $325-million facility operational by December 2012.