One of the more exciting stories being extracted from the Bakken is natural gas. Although volumetrically it doesn’t compare to the Bakken’s crude, the natural gas plays are creating a culture of innovation that will completely transform how people live their daily lives. Many energy experts and professionals believe this “natural” shift is happening across the planet and will continue over the next decade as infrastructure is built. And the Bakken will offer a front row seat in the creation of an economic energy nucleus that will be connected to a bigger system, yet somewhat sustainable within its own energy cycle.
“The shales plays have been a paradigm shift in our industry, we always knew there was gas in the shale, but we couldn’t economically get that gas out now with the technologies of horizontal drilling and the continued ability to use fracking, which isn’t new as we’ve been fracking for 25 years,” Ron Jibson, past chairman of American Gas Association said. “With those technologies we are able to get the gas out of the shales very economically. As a result of that you have an abundance of natural gas that we’ve never had before.”
Jibson’s claim towards an abundance is undeniable as the U.S. recently became the world-leader in natural gas production, by reaching a new all-time high of 328 billion cubic feet per day (BCPD), according to the BP 2014 statistical world energy review. Furthermore, U.S. natural gas production has grown over 20 percent the past five years and the world’s usage of natural gas is about 24 percent of all primary energy consumed. Oil is approximately 33 percent and coal’s is 30 percent.
Natural gas trends are off the chart considering the U.S. has surpassed once global leaders Russia, Qatar and Iran in production gains. The capturing of natural gas, as a by-product to the massive shale expansion, seems likely to continue its prodigious growth in the Bakken and across the planet.
Qatar’s natural gas production is something Ken DeCubellis, CEO, BlackRidge Oil, is familiar with, giving him an edge at understanding the current state of natural gas.
“I used to work for Exxon Mobil. And in the early 2000’s into 2006, Exxon was worried, as was the rest of the country that we were running out of natural gas here. They embarked on a multi-year program investing about 30 billion dollars in the Middle East, in a country called Qatar, to get access to the natural gas in Qatar, liquefy it, ship it over to the US, regasify it offshore and get it into the grid,” DeCubellis said. “Thirty billion dollars. OK. Now what Exxon is trying to do is take all the natural gas that we are producing here in this country and export it. So they are going in the opposite direction. Two drivers behind why the energy situation has flipped completely on its head in a short period of time. It’s the advent of horizontal drilling and hydraulic fracturing. And it’s the combination of those two which is very technology focused that has unlocked this potential.”
Jibson, who, in addition to his leadership role with the AGA, is Chairman, President and CEO of Questar Corp, added his own natural gas historical, saying back in the 1970’s president Carter declared the country was running out of gas. Jibson believes Carter was right at the time, but ingenuity and progress developed methods and new technologies to change the natural gas industry.
“We can now look at natural gas beyond just space heating and water heating we can look at it for enhanced power generation, continue building more and more plants on natural gas, its a backup to all renewable energy and at the same time we can use it as natural gas transportation,” Jibson said. “We can do all this and even look at exporting natural gas. Six years ago we were considered an importing, now we are looked at as an exporter of natural gas.”
Questar Corporation, based in Salt Lake City, Utah, is a natural gas-focused energy company specializing in retail gas distribution, interstate gas transportation and gas production, which are conducted through Questar Gas, Questar Pipeline and Wexpro. Jibson believes this rapid shift in the natural gas supply will also transform the natural resource’s role as a “abundant foundation fuel” rather than a “bridge fuel.” With saying that, Jibson recognized the reality of using all forms of energy.
“Now it probably is not a great situation to have just one fuel be a foundation fuel,” Gibson said. “So as people talk about natural gas being that foundation fuel, which we believe we have the abundance for it, but we also have to be cognisant of we need a large portfolio of many supply, and that includes the development and better technology in all the area.”
U.S. Senator John Hoeven agrees with Jibson on the importance of a balanced energy portfolio and sees North Dakota’s long term approach to natural gas as the role model for other shale plays.
“We are producing huge amounts of natural gas which really is a byproduct of our drilling for oil,” Hoeven said. “But the key is we have to capture it rather than flare it and get it to market. Part of that is creating a market for that natural gas.”
Hoeven continued saying he has introduced legislation in the U.S. Senate that addresses jobs, national security and international trade that ties in North Dakota’s shale play, with natural gas playing a substantial role.
“This shows the global reach of North Dakota,” Hoeven said. “The things we are doing here don’t just have national ramifications, they have international ramifications in a very meaningful way.”
Looking at the nation’s distribution backbone as an indicator for trends, Tom Petrie, president and chairman, Petrie Partners, said companies like BNSF are extremely interested in natural gas technologies because of the significant cost savings.
“We are in the early stages of the railroads testing their LNG as a product for their engines,” Petrie said. “They are under a lot of pressure because they have to run ultra low sulfur diesel. One thing we learned about ultra low sulfur diesel is it is a lot easier for Congress to pass a law, or the EPA to pass rules mandating it than it is to do it.”
Petrie said the price of diesel used to “sell for about seventy-five cents less” than regular gasoline, whereas now diesel sells for “about a dollar more.” Petrie claims this is because of ultra low diesel standards.
“Natural gas is selling for about $24 dollars an equivalent barrel, versus a $104 dollars a barrel,” Petrie said. “That’s a huge spread to work with. Now the question becomes will the performance be up to the standards of BNSF’s needs for their engines, they’re doing the tests on them right now.”
Like Petrie, Hoeven stays in contact with BNSF officials on the progress of their research into natural gas powered locomotives.
“We are working with BNSF as they try to use natural gas to run their locomotives instead of diesel,” Hoeven said. “Again, not only a win in terms of reducing costs in using natural gas, but also an environmental win.”
While the country lays pipe, constructs refineries and gas plants, the Bakken is showing everyone why it is a world class play. Currently, capital investments from ONEOK, Hess, North Dakota LNG and CHS show investors from wall street to main street the value of the Bakken’s natural gas and how the public will utilize it.
This past May, Hess Corporation completed the expansion of the Tioga Gas Plant, which more than doubles the operational capacity of the facility, according to Hess Corporation. The project is part of a more than $1.5 billion infrastructure investment made by Hess between 2012 and 2014 in North Dakota.
“The Tioga Gas Plant was built in 1954, just three years after we drilled the very first oil well in the state of North Dakota,” said John Hess, Chief Executive Officer of Hess Corporation in a media release. “Today, as one of the largest oil and gas producers in the Bakken, we are committed to responsible long-term growth in North Dakota and proud to contribute to the state’s infrastructure.”
According to the Department of Mineral Resources August Director’s Cut, the $1.5 billion expansion project, began processing about 120-million standard cubic feet of gas per day (mmscf/d) in May. Hess Corporation expects the plant will process at least 250 mmscf/d with the potential to increase beyond 300 mmscf/d.
“North Dakota leads the oil and gas industry because it is an attractive place to invest, with strong public-private partnerships, responsible regulation and a firm commitment to work hand-in-hand with the business community,” Hess said. “Since 2010, we have invested more than $10 billion in North Dakota, we currently have a 17 rig drilling program with 2014 net production expected to average 80,000 to 90,000 barrels of oil equivalent per day, and are proud to contribute to the state’s economic success.”
With 640,000 net acres, oil production and physical structures in the Bakken, Hess Corporation has made North Dakota part of the company’s growth strategy.
“As a leading operator in one of the best shale plays in the world, the Bakken will be the single biggest contributor to our production growth over the next five years,” said Greg Hill, President and Chief Operating Officer of Exploration and Production for Hess.
Like Hess Corporation, North Dakota LNG is confident the Bakken is just beginning to gas up. North Dakota LNG is one of the companies who will be working with Hess Corporation’s Tioga operations and is invested heavily into the Bakken’s natural gas play as well. And on August 30, 2014, North Dakota LNG made liquid natural gas.
“It’s up and running. We are delivering on what we said we would do, now making LNG and look forward to 10,000-a-day.” Hughes said. “In fact, the second plant in Tioga is close too. The major components are complete. I am heading to San Antonio this month to inspect the skids and skeleton.”
Hughes said construction on couldn’t have gone better with little to no surprises along the way. When asked how it was working with a large company like Hess, Hughes said
“We love our relationship with Hess, they’ve been great to work with. Everyone worked together from Plum Energy to CCC Construction to Triangle Electric to Hess.” Hughes said. “Everyone’s been busting their tails to get this project done.”
The next phase is scheduled for completion fourth quarter of 2014 and will be capable of producing 66,000 GPD. Now that most of the pieces are in place, Hughes and NDLNG is looking to expanding their market share further into the natural gas industry.
“I view this as the tip of the iceberg and look forward to more facilities in the Bakken region,” Hughes said. “I think what is happening with natural gas is exciting and is a wonderful opportunity for growth.”
Another company that has made significant investment into the Williston Basin over the years is ONEOK Partners. ONEOK has announced nearly $4 billion for growth projects related to resource development in the Williston Basin through 2016, according to Brad Borror, manager of Communication, ONEOK.
“ONEOK Partners’ Williston Basin natural gas processing capacity now exceeds 500 million cubic feet per day (MMcf/d),” Borror said. “That’s five times more than our processing capacity in the region was in 2010 – and we expect that number to grow to more than 600 MMcf/d during the fourth quarter of this year, when the Garden Creek III plant is completed.”
Furthermore, ONEOK expects to complete the Demicks Lake plant, a 200-MMcf/d natural gas processing facility, and related natural gas infrastructure, including natural gas gathering pipelines and natural gas compression, during the third quarter 2016. Ground work has been ongoing at the site since mid-July, and the foundation work is expected to be complete before winter sets in.
According to Borror, ONEOK Partners’ Williston Basin natural gas processing capacity is expected to increase to approximately 1.1 billion cubic feet per day by the third quarter 2016 following the completion of additional natural gas infrastructure in the region.
“ONEOK Partners is committed to executing its growth strategy, which includes announced investments of approximately $7 billion to $7.5 billion through 2016 for capital-growth projects and acquisitions across our operating areas related tonatural gas gathering and processing, and natural gas liquids,” Borror said. “Of these investments, nearly $4 billion are for growth projects related to resource development in the Williston Basin.”
Delving deeper into the North Dakota’s natural gas shift, the connectivity of agriculture and energy enters the picture. Hoeven believes the recent announcement of CHS’s fertilizer plant will position North Dakota in new ways that will have a global impact.
“We are working with Cenex Harvest States to build a multibillion dollar fertilizer plant,” Hoeven said. “Right now that fertilizer has to come from India, getting shipped across the ocean, hauled to North Dakota on trains. We are at the end of the line creating costs and questions about dependability. Think about producing it here. We are just barely scratching the surface here.”
According to CHS Inc, the company expects to invest about $3 billion to build a plant that will convert natural gas into fertilizers by the first half of 2018. The plant will sit on a 640-acre site near the Spiritwood Energy Park (Jamestown, ND) and produce more than 2,400 tons of ammonia daily which will be further converted to urea, UAN and Diesel Exhaust Fuel (DEF). The fertilizer plant will be the single largest private investment project ever undertaken in North Dakota and the single largest investment in CHS history.
“With this decision, CHS is taking an important, strategic step on behalf of its member-owners by ensuring them a reliable domestic supply of nitrogen fertilizers essential to help farmers raise healthy, profitable crops to feed a growing global population,” said Carl Casale, CHS president and chief executive officer.
With $20-plus billion dollars in energy related infrastructure investments in the Bakken, North Dakota’s tank may be only half full. According to a research report by Allied Market Research the global shale gas market is forecast to reach $104.1 billion by 2020 and the U.S. Energy Information Administration expects natural gas consumption to reach nearly 73 billion cubic feet per day in 2014, which is an increase of 1.7 percent from 2013.
These projected numbers, combined with the Bakken’s unique shale play, are still attracting potential natural gas manufacturers, according to Hoeven. Hoeven teased that the abundance of ethane in the Bakken could attract a potential plastics manufacturer to the state in the near future.
“There’s a lot more that can be done in North Dakota,” Hoeven said. “I think there is a pretty exciting future with natural gas.”