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Oneok Partners to Expand North Dakota Natural Gas Operations

North Dakota's swelling revenues from robust shale-driven production should get richer based on an announcement Tuesday by Tulsa-based Oneok Partners LP to invest $650-780 million by 2016 for new natural gas infrastructure, spending that could relieve a chronic flared gas problem.

Senior executives of the company gathered with Gov. Jack Dalrymple in Bismarck, ND, on Tuesday to outline plans for new natural gas processing and pipeline facilities, which are much coveted in the nation's second biggest oil-producing state, where production records for oil and gas have been broken almost every month (see Shale Daily,Nov. 15).

Oneok Partners President Terry Spencer said the firm had a "commitment to address natural gas gathering and processing constraints in the region and help reduce flaring."

Dalrymple predicted that the additional investment would help curb the state's high level of associated gas flaring (near 30%).

“We continue to work with private industry to expand our takeaway capacity, to add value to the natural gas produced in western North Dakota and to reduce the flaring of this valuable energy resource,” said Dalrymple. "Because of their significant investments in our state, we are able to further reduce flaring and increase the market opportunities for North Dakota’s natural gas,” he said of the partnership.

Plans are to increase overall processing capacity in North Dakota to 800 MMcf/d and natural gas liquids (NGL) pipeline capacity up to 160,000 b/d with a new processing plant and by expanding Oneok Partners’ existing Bakken NGL Pipeline.

The proposed Lonesome Creek processing plant in McKenzie County, ND, would add 200 MMcf/d of capacity to Oneok’s current network of five plants. A second expansion of the Bakken NGL Pipeline would increase overall capacity to 160,000 b/d from 135,000 b/d; the pipeline now is being expanded to 135,000 b/d from its original 60,000 b/d capacity.

Oneok estimates that the cost of the processing plant would be $320-390 million, with completion by the end of 2015. In addition, the partnership, which has more than $6 billion in outstanding announced investment plans, would invest $230-290 million to expand and upgrade existing gas gathering and compression infrastructure related to the processing expansion. In addition, the partnership expects to invest $100 million to increase capacity on the Bakken NGL Pipeline.

Oneok Partners claims to be the largest independent operator of gas gathering and processing facilities in the Williston Basin, operating more than 6,000 miles and more than three million acres where production is dedicated to its system. The 600-mile Bakken pipeline, completed in April, transports unfractionated NGLs to its 50%-owned Overland Pass Pipeline in Colorado.

The state is in the midst of a push with an industry stakeholder task force, attempting to cut flaring levels (see Shale Daily,Sept. 18).

A spokesperson for the North Dakota Department of Mineral Resources (DMR) appreciates Oneok Partners’ "continued commitment to reducing flaring" and said the expansions would be "a timely contribution to the effort. [We] will continue to support Oneok, as well as the North Dakota Petroleum Council flaring task force as they work on solutions to reduce flaring.”

North Dakota Pipeline Authority Director Justin Kringstad agreed, adding it was "very encouraging to see the continuing commitment” to reduce flaring. Longer term, state energy officials expect that gas production "is going to continue to grow and we hope to see additional investments in projects like this."

Of the $6-6.4 billion in total investments announced by Oneok Partners, split equally between gas processing/infrastructure and NGL infrastructure through 2016, about half of the proposed projects are slated for the Williston Basin, the company said. In aggregate, the projects are expected to generate gross earnings multiples of 5-7 times, a spokesperson said.

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