Standardizing a barrel of Bakken oil could be part of the solution to safer transportation of the light, sweet crude.
The North Dakota Industrial Commission discussed what may be needed to regulate oil conditioning at their monthly meeting on July 29, and decided to quickly set up an additional meeting to gain greater insight on the subject. Oil conditioning can be done one of three ways: through processing at a refinery where various components are removed through the boiling process; by stabilization at a plant by removing anything lighter than butane; or separating oil from the water and gas at the wellhead. While the conditioning options downstream are often utilized, the state’s Department of Mineral Resources Director Lynn Helms told the commission that properly handling the oil as it comes out of the wellhead before it goes to pipe, on a truck or rail car allows for the safest transport.
“We do want to be sure that we understand the conditioning that’s required and is meant to be taking place in North Dakota,” said Gov. Jack Dalrymple. “What steps do we have to take to begin to monitor and basically regulate that, oversee it? We assume (operators) are doing conditioning but we have no mechanism to verify that.”
Study will give some insightA recent study conducted by Turner Mason, a Dallas-based consulting company, reviewed Bakken crude samples collected at refineries by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, to create a set of parameters so that if a company buys or hauls a barrel of oil, it would be standardized much like a West Texas Intermediate benchmark.
A unique aspect of the study was that Turner Mason also recorded field-operated data to determine what conditions resulted in a certain type of barrel versus another. Helms said that is the only study that provides the parameters to achieve a uniform, safe barrel.
“By having those, they can now model how many separators should it go through, what should the conditions at a heater treater be, how many tanks should it move through, so at the end it has no propane in it and very, very little butane,” Helms said. “It can go into a truck, rail car, or anywhere and not have potential problems.”
To this point, oil conditioning has varied depending on what was cost effective for an operator. “I think the goal of the commission is to get to a set of parameters that allow for that but make sure the oil is safe to transport,” Helms said.
Obtaining a scientific basisWith conflicting Bakken volatility studies and new federal rail regulations on the horizon, the NDIC wants to respond to the information in the study as soon as possible. The commission plans to meet during the week of Aug. 3 to hear from Turner Mason and clarify what needs to be done to develop a Bakken standardization.
“This recent stuff that’s come out from DOT … apparently it keeps referring to ‘Bakken oil’ like everybody’s supposed to know what that means,” Dalrymple said. “That doesn’t sound very scientific to me and we have to get it on some type of scientific basis.” Dalrymple said the meeting could help determine whether the commission needs to set up a hearing for input on potential oil conditioning regulations.
A Bakken benchmark?Speaking with reporters following the commission meeting, Helms said the question people should be asking is not how volatile or flammable Bakken oil is, but what is a Bakken barrel when it is properly conditioned and safe for transportation?
“In almost every way we can control that,” Helms said. “We can separate those components through different pressures and temperatures … we already have a law in place for NDIC to establish some standards.”
No other states have such standards to arrive at a type of oil, Helms said, so “again, we’ll be at the tip of the spear,” he said. “We need to invent a new paradigm on how to do this.”
And the state may not stop there. One of Turner Mason’s specialties, according to Helms, is standardizing an oil product in order to develop a crude oil benchmark that could be traded on the commodity exchange.
“I think it will really enhance the value of a Bakken barrel because people will no longer be buying a barrel and comparing it to a WTI or an Eagle Ford or a Brent barrel. They’ll know what’s in it so when it arrives at the refinery they know what the yield is going to be,” Helms explained. “So I think in the long run the operators will really benefit from this because what they’ll be selling will be a higher value commodity.”