Even though a major investor in the Bakken play, Oneok is probably not yet a household name in North Dakota, Mick Urban told the audience at the North Dakota Governor’s Pipeline Summit in June. Working in western states government relations for Oneok, Urban said he wanted to provide a “snapshot” of Oneok.
Oneok is a Fortune 200, premier energy services, company headquartered in Tulsa, Okla. The company is 106 years old and started out as Oklahoma Natural Gas, a distribution company established before Oklahoma was granted statehood.
Today Oneok has more than 2 million customers in Oklahoma, Kansas and Texas that it serves every day.
The culture of the company is service, Urban said.
“When you’re running an LDC, a local distribution company,” he said, “you’re going to see those same customers every single day for 50 years maybe, or more” and “you learn to create great long-term relationships.”
Urban then explained that Oneok, Inc. is a 43.4 percent owner of Oneok Partners, which is a master limited partnership, or MLP.
He said MLPs are generally pipeline companies and are organized in ways that reward and encourage capital investment.
Oneok Partners is involved in midstream natural gas gathering, liquids processing and pipelines. As it stands today, he said, Oneok Partners has $8.9 billion in total assets, and between the Gulf of Mexico and the Canadian border Oneok Partners has between $4.7 billion and $5.6 billion in projects under way or announced.
Pointing to a slide of a natural gas flare, Urban described it as an “unmet need.” He said for someone who has been in the natural gas business for 16 years as he has, seeing a flare prompts a reaction because flaring just isn’t the right thing to do. So, he said, Oneok is developing solutions to address this situation.
“Just for those of you who don’t think about natural gas processing plants every single day, in essence you drill for oil and up comes a lot of other stuff besides oil,” including natural gas and natural gas liquids, Urban said.
The Bakken, he added, is a liquids-rich play and people are flaring the non-oil product, which includes very valuable natural gas liquids such as butanes, propanes and isopropanes.
Starting with raw natural gas, Oneok builds gathering systems and pipelines from oil wells to collect those liquids which are then taken to a processing plant that basically does one thing; it strips off the natural gas components (methane and ethane) which go into a high-pressure natural gas transmission line and then to market. Everything else, i.e., the butanes, propanes, natural gas, goes into an NGL pipeline to market.
Bakken growth projects
In the gathering and processing units, Urban said Oneok is spending $1.1 billion to $1.2 billion “as we speak.”
The company opened the Garden Creek natural gas processing plant northwest of Watford City in January and will process 100 million cubic feet per day. Oneok is also building Stateline I and Stateline II sister processing plants in Williston and Watford City, respectively. Each of those, Urban continued, will process 100 million cubic feet per day. Stateline I will go online in late fall, and Stateline II will go online in early 2013.
In addition, Oneok recently announced the Divide County Gathering System, a 230 mile, $160 million project in Divide County, an area in which Oneok has not operated before according to Urban
Existing Oneok infrastructure
Urban then pointed to a slide showing U.S. Geological Survey map with oil and gas reserves estimates in the Bakken. Transposed on the map were numerous pipeline traces, a majority of which were blue, and three gas processing plants. Urban said where usgs is showing there is oil and gas, all of those blue lines represent Oneok pipe and “we’re where it’s happening” he said. The “takeaway,” he said, is that these USGS figures indicate 3.65 billion barrels of oil and 1.85 trillion cubic feet of recoverable gas. With its gathering lines and processing plants, he said, Oneok is where the product is.
Stateline I and II plants
Turning his discussion back to the Stateline I and II plants, Urban reiterated that these plants will each have 100 million cubic feet of capacity. Showing the aerial photos of the Stateline I plant under construction, Urban said the plant looks “fantastic” at this point and will be operational this year. Stateline II will be in service next year.
Natural gas liquids
Urban said his discussion thus far had focused on gathering and processing, but would now turn to what happens to the NGLs after they are processed.
Oneok, he said, is developing its Bakken NGL pipeline that will carry the NGLs processed in the Bakken to market.
Oneok is also upgrading its rail facility at Sidney, Mont. to increase NGL loading capacity from seven rail cars per day to 49 per day. He said because the Garden Creek plant is now on line, Oneok has to get the product to market and until the Bakken NGL line is complete, they are using rail.
Urban went on to say that Oneok and Williams built the Overland Pass pipeline that will transport up to 210,000 barrels per day of NGLs from the Piceance and Denver-Julesburg basins in Colorado as well as from the Opal area in Wyoming.
The Overland Pass line has a fractionator plant at the east end located at Bushton, Kan., and Urban said that plant is being upgraded with greater storage to handle more capacity.
The Bakken NGL pipeline
Turning his focus to the Bakken NGL pipeline, Urban told the audience that it will be the first NGL pipeline coming out of the Williston basin. He said this line will allow Oneok to recover ethane and send it to market whereas currently ethane is left with methane in the natural gas stream.
A 12-inch pipeline extending 525 miles from Eastern Montana to the Overland Express line in northern Colorado, will have an initial capacity of 60,000 barrels per day of raw, unfractionated NGLs.
But that capacity, Urban said, can be expanded to 110,000 barrels with additional pumping stations. Construction is presently underway on four of five spreads in Montana and Wyoming.
The project, which is expected to be operational in the first half of 2013, is estimated to cost between $450 million and $550 million.
The Bakken Express crude oil pipeline
Stepping into a new service area, Oneok announced in April the 1,300 mile, $1.5 billion to 1.8 billion Bakken Express crude oil pipeline that will transport up to 200,000 barrels of crude per day from the Bakken to Cushing, Okla.
Urban said Oneok business development people are presently working with producers and anticipate having an open season either later this summer or early fall.
Oneok is looking to begin construction in late 2013 or early 2014, and Urban said they would like to have the pipeline in service by early 2015.
Total Bakken-related investment
In closing Urban summed up Oneok’s total current investment in Bakken-related operations. Oneok is spending between $1.5 billion and $1.8 billion in gas gathering and processing in the Bakken, and another $595 million to $730 million on NGL projects in the Bakken.
And with the estimated $1.5 billion to $1.8 billion to be spent on the Bakken Express crude oil pipeline, Oneok’s total current projected investment in the Bakken is between $3.2 billion and $3.7 billion.
