It is a remarkable time in North Dakota when CHS Inc. makes a then-record $3 billion dollar fertilizer facility announcement only to be upstaged a week later by Badlands NGL. Badlands’ $4.2 billion announcement became largest private sector investment made in state history. Off-the-record, energy officials and experts are indicating there are more billion dollar announcements coming to the Bakken in the future.
The new polyethylene (PE) manufacturing facility was announced to be constructed in North Dakota next year with completion in 2017. That announcement clearly indicates a trend in natural gas and infrastructure that will change the future of North Dakota for generations .
When combining the CHS and Badlands announcement with Hess, ONEOK and North Dakota LNG’s, overall, we are talking about $10-15 billion dollars in natural gas infrastructure being invested into North Dakota. This is a trend in the Williston Basin that Badlands NGL’s, LLC Chairman and CEO William Jeffrey Gilliam understands.
“North Dakota elected officials and agencies have provided Badlands with by far the most business-friendly and pro-development environment in the United States,” Gilliam said. “We have been fortunate to attract many of North Dakota’s leading business and community leaders as Badlands investors.”
The value-added manufacturing facility will use the Williston Basin’s surplus of NGL sourced ethane gas coming out as a byproduct of oil production. According to Gilliam, the NGL facility will significantly reduce the amount of natural gas flared into the atmosphere addressing some of the environmental and market concerns.
“The state and the nation have a huge over surplus of ethane, and what we are looking at doing is building a 1.5 million metric ton ethane gas to polyethylene plant here in North Dakota,” Gilliam said. “We are looking at that and getting it done hopefully by the end of 2017. We believe right now we are running out of places to sell ethane gas, what this is going to do is not only give us places to sell it so that drilling can continue at the same pace it is going, but also in fact provide better markets and better prices for ethane gas to producers here in the Williston Basin.”
When asked whether the infrastructure in North Dakota is set up to handle this type of expansion and growth, Gilliam believes the challenges western North Dakota brings will be no issue at all in construction and execution of the project.
“The infrastructure in terms of building this facility we are going to have challenges, I don’t think there is any question about that, but the good news is the engineering company we are working with Tecnicas Reunidas from Madrid, Spain, and also with Vinmar projects the folks who are going to be buying the polyethanol from us, they’re used to developing projects like this in more difficult and challenging environments that the United States and North Dakota,” Gilliam said. “Tecnicas Reunidas has built major facilities in Siberia, they have $2.5 billion dollars of backlog in western Canada right now. Vinmar is starting up a polyethylene in Egypt this year. In some ways this is going to kinda almost seem like a walk in the park for them.”
North Dakota has been experiencing low natural gas prices for the past several years Given the investment into natural gas, locally, nationally and globally, will these trends indicate a rise in the resource or even perhaps traded globally?
“Looking at the price of natural gas is a little bit outside our sphere, but we look at it just because it affects us,” Gilliam said. “The most recent information we’ve gotten from a study that we have going on with RBM Energy in Houston right now is, if you look at the NYMEX curves they’ve been projecting prices getting back up but they’ve been wrong every year for six years. I think if we look at right now the logical amount of gas that’s going to be produced in the United States I would say the long term, five to six year forecast is either neutral to negative not positive. I don’t think it is going to go up in price.”
A quick overview of the Badlands facility’s projections indicates it will convert the ethane to polyethylene, which is used to make a wide variety of end use consumer and industrial products. The facility will be able to produce 3.3 billion pounds annually and employ 500 in manufacturing, marketing, administrative, safety, financial and executive positions. Gilliam explains further who would be a potential customer of theirs too.
“For our polyethylene, someone who is compounding polyethylene resin into pipe that would go into the ground here. Someone who is making specialty film for food packaging or medical packaging,” Gilliam said. “Really someone who, I will give you an example of how we think we are going to be a bit different than a major plant that Exxon builds or that Dow builds, maybe we are building the same technology as they are but we are very very actively looking to go to customers and ask customers to give us a tighter specification, give us a higher purity thing you’d like to see, and we think we can adapt ourselves to be a bit more customer sensitive because we only have one plant and Dow and Exxon have lots of plants. They’re moving a bit more product than us. So I would say that if you look at the IHS Study for the state, folks that are closer to here than the Gulf Coast customers, in the Industrial Midwest, we think that customers like that who want to work folks like us that are willing to do new applications for them and everything. That’s our perfect customer.”