Moving quickly through 29 well-illustrated slides, the director of the North Dakota Pipeline Authority gave attendees of the North Dakota Governor’s Pipeline Summit a concise picture of the transportation modes and processing facilities available for oil and gas produced in the state, as well as an overview of what was needed, and planned, to meet future production needs.
“I want to set the stage properly for this tremendous panel of industry speakers,” said Justin Kringstad, referring to the 10 pipeline company executives invited by Gov. Jack Dalrymple to talk about their firms’ planned and potential investments in pipeline and processing infrastructure — investments that would reduce impacts and increase safety on North Dakota’s roads and highways, utilize the flared natural gas, and provide reliable and efficient routes to markets that offered a competitive price for the area’s sweet, light Bakken crude.
Although the U.S. Williston basin extends into eastern Montana and northern South Dakota, almost all the petroleum production in the region comes from the Bakken petroleum system in western North Dakota, as will the “bulk” of future crude, Kringstad noted.
Recognizing activity across the border to the west, “Montana is a little bit of a wild card right now,” he said, “but their crude and natural gas production will have an immediate impact … on transportation infrastructure, so we need to keep them in the works here as well,” he continued, pointing to a presentation slide named, “Forecasting Williston Basin Oil Production, BOPD,” that shows a slight amount oil coming from South Dakota and increasing amounts from eastern Montana, but never more than about 100,000 barrels of oil per day between now and 2025.
Challenges for North Dakota, industry
Kringstad laid out four challenges facing North Dakota and its petroleum industry. The first three were as follows:
1. Moving oil out of the Williston basin to viable markets the safest, efficient and most economical way possible, which industry experts agree is via pipeline.
2. Moving oil within the Williston basin; again utilizing pipelines, albeit smaller gathering lines, to transport the oil in the safest, efficient and most economical way possible.
3. Congestion and a decrease in demand for light, sweet crude in the Great Lakes mid-continent region, Padd II, where pipeline and rail transport exist and are being expanded to take more North Dakota oil to market.
“I want to set the stage for Challenge No. 1 … what’s currently happening, in order to move our crude oil to markets outside the Williston basin,” Kringstad told summit attendees.
“You can see, as of March 2012, we have just a little over a quarter of our crude being moved by railcar out of the region,” he said, pointing to the slide titled “Williston Basin Oil Transportation.”
“The remaining 72 percent is being moved by pipeline, either to markets outside of North Dakota or to the Tesoro Mandan refinery just across the river” in South Dakota.
“Our current pipeline infrastructure,” he said, pointing to the map “North Dakota Crude Oil Pipelines,” includes “the Enbridge pipeline system (in red) … on the northern tier of North Dakota, which moves 235,000 barrels per day … east toward the Great Lakes and the mid-continent region of the United States. We have in gold our Tesoro pipeline system which transports crude oil to the Mandan refinery,” he said, noting the refinery was being expanded.
“And last, but not least, we have the True companies, or the Butte Pipeline System, which has a hub, as you can see, down near Baker, Montana … (has) 144-150,000 barrels a day moving south to Guernsey, Wyoming. Once it gets to Guernsey, the crude oil then travels east toward the mid-continent refining markets.”
Crude by rail a recent development
Transporting“crude oil by rail … has been a recent development for North Dakota,” Kringstad said, showing a slide with 12 BNSF Railway crude loading locations in the state and three more planned, for a total of 15.
His next overhead showed Canadian Pacific with four crude loading facilities, all in the western part of the state.
All told, “250,000 barrels a day or more are leaving the region by railcar,” he said.
Another slide, “Williston Basin Oil Production & Export Capacity, BOPD,” shows how North Dakota crude was delivered to markets in 2007 (pipeline only) through today (a combination of pipeline, rail and tanker truck), and how Kringstad thinks it will be moved through 2025 (pipeline only), providing daily production stays under 1.6 million barrels a day.
“In black we have the pipeline systems at the bottom that have been rubber stamped. Those are officially going forward. Today you are going to hear from those other six projects (shown in multi-colors), which are proposed pipelines that you can see have a tremendous amount of export capacity for the region,” he said.
The six projects are at various stages of business development or still being permitted.
Per Kringstad’s estimates, if just three of the six projects move forward and are completed on schedule, all North Dakota crude will be transported to market via pipeline by January 2014.
“With the projected growth, even if I am conservatively optimistic, it looks very promising,” he said.
Moving crude within North Dakota
Challenge 2 involves transporting oil from wells to one of the export pipeline transmission systems or to a railway loading site.
As of February, “about 74 percent is moving by truck (26 percent by pipeline), so there is a tremendous opportunity for growth in our crude gathering in North Dakota,” Kringstad said.
“We … keep track of all the wells and how they’re gathered,” he said, pointing to a slide titled, “North Dakota Crude Gathering,” where the color grey means the oil from a well site is transported by tanker truck and where the colored dots mean it’s moved by gathering lines — essentially a smaller diameter pipeline.
The next slide (not shown here) has graphs for each of the four major oil producing counties in North Dakota, showing how much oil is currently being gathered by pipe and how much by tanker truck, and then moved to a main pipeline or rail loading facility for transport to market.
Mountrail, the “birthplace of the modern Bakken play in North Dakota … (and) having the highest amount of growth” now has gathering lines to transport 45 percent of its crude oil.
“In time you can see that the infrastructure” has been developed,” Kringstad said.
“In some of the more emerging counties … you can see tremendous opportunities for investment” for gathering systems, with 95 percent of the oil produced in Williams county being transported from the well by truck; 89 percent in McKenzie county; and78 percent in Dunn.
Best oil gets lowest price
Because less and less high quality oil was being produced in the United States, in about 2005 mid-continent refineries began converting and expanding to accommodate the promise of increasing amounts of lower cost heavy crude from Alberta’s oil sands, thus helping to create the third challenge defined by Kringstad.
Pipeline capacity to the region from the northwest was also increased to meet the coming demand.
“You can see in red the major pipeline systems all funneling down toward that Great Lakes mid-continent region, so we’re having quite a bit of congestion taking place in Pad II,” he said in reference to “Pipeline Challenge #3,” a map of crude oil pipelines provided by CAPP, the Canadian Association of Petroleum Producers, and including such pipeline giants as Enbridge and TransCanada.
“The same companies that are working on solutions for North Dakota, are also working on solutions for the North American industry as a whole,” he noted.
In the next slide, these three major Padd II refineries are expected to buy less light oil per day than in 2013: BP, Whiting, Ind., -260,000 barrels of oil per day; ConocoPhillips, Wood River, Ill., -130,000 bpd; and Marathon, Detroit, Mich., -65,000 bpd.
The fourth challenge
The fourth challenge North Dakota “will be facing … likely in the coming years is North America as a whole” with its tremendous growth in shale resources,” Kringstad said.
“We’re going to have to keep our eye very closely on the North American outlook for North Dakota crude oil because we’re now a major player.”
Gas flaring a major issue
Kringstad then turned to natural gas, starting with a slide showing gas being flared from an oil well. About one-third of the gas produced in conjunction with oil in North Dakota is flared for lack of a delivery system and processing facilities.
“The flaring image that you see here is an issue that must be aggressively attacked by industry in order to get it curbed as quickly as possible,” he told the audience, echoing what the governor and N.D. Congressional delegation had said before him.
Slide 35, “ND Gas Facility/System Intake,” showed the state’s natural gas production in red, “growing very quickly alongside” its crude oil.
There are 16 plants in operation, with three news plants “in the works” and “one major expansion up in the Tioga area,” he said, reiterating the need for “a tremendous amount of investment” in natural gas gathering lines, processing, and bigger pipelines to take it to market.
There have been some victories
“One very exciting development,” Kringstad said, pointing to a slide titled “ND Gas Gathering Statistics,” “you can see (here) in red,” and that’s the number of wells that we have had that are not connected to natural gas gathering in western North Dakota. For the first time in March, “due to great working conditions this last winter,” the red line dips down.
“We want to see the number of wells that are flaring continue to decrease. … We want to get that downward slope moving as quickly as possible,” he said.
The next graph, “First Time Gas Sales Per Month,” showed the number of new wells getting connected into a gas gathering system in a given month. Again, March showed the best connections of any previous month.
“We want to continue to see that trend moving with an upward motion,” Kringstad said.
The next overhead showed two million homes being heated by natural gas produced and processed in western North Dakota
Working to better understand ‘our natural gas future’
At the “pipeline authority we are aggressively working toward a better understanding of our natural gas production, our natural gas future,” Kringstad said.
“We saw some interesting trends in Montana with some of the older Bakken wells,” he said, referring to a new report the North Dakota Pipeline Authority commissioned and which “should give us a much better understanding of our future natural gas production, and the processing and pipeline infrastructure that’s needed.”
Keep your eyes open for that if you have an interest in that topic.
Editor’s note: An article on the results of that study will appear in the second August edition of Petroleum News Bakken.
