Oneok's Bakken Processing Is Expanding - Garden Creek III Plant

Oneok Bakken Investments
Oneok Bakken Investments

Oneok Partners announced plans to invest more in Bakken processing infrastructure in North Dakota.The company will spend $325-360 million to build the Garden Creek III plant in McKenzie County, ND. The plant will be built near the 100 mmcfd Garden Creek I and the 100 mmcfd Garden Creek II plants.

Oneok has already spent or has plans to spend $2.1-2.3 billion on natural gas processing and gathering investments related to the Bakken. The latest round of projects also includes expansion of NGL facilities in Kansas that will allow the company to handle even greater volumes of Bakken liquids. Total Bakken investments for Oneok will easily exceed $2.5 billion.

The partnership's previously announced Stateline II natural gas processing plant is expected to be in service during the first quarter of 2013. When completed, the natural gas processing capacities of the Garden Creek II and III plants, and the Stateline II plant combined with the existing Garden Creek, Stateline I and Grasslands natural gas processing facilities will be 590 mmcf/d in the Williston Basin.

This will be the sixth plant planned/operated in the Williston Basin by Oneok:

  1. Grasslands (90 mmcfd)
  2. Garden Creek I (100 mmcfd) online December 2011
  3. Stateline I (100 mmcfd) completed September 2012
  4. Stateline II (100 mmcfd) expected completion Q1 2013
  5. Garden Creek II (100 mmcfd) expected completion Q3 2014
  6. Garden Creek III (100 mmcfd) expected completion Q1 2015

Hess's Bakken Spending Down $900 million in 2013 to $2.2 Billion

Hess Bakken Map
Hess Bakken Map

Hess Corporation's Bakken spending is set for $2.2 billion in 2013. That's almost 33% of the company's entire budget, but down from the $3.1 billion that was spent in 2012. Company-wide spending will drop to $6.7 billion in 2013 from $8.3 billion in 2012.

Greg Hill, President of Worldwide E&P, stated, "Our expenditures in the Bakken are planned to be $2.2 billion in 2013 versus approximately $3.1 billion in 2012. This reduced level of spend is driven by lower well costs associated with our transition to pad drilling from hold by production mode and decreased investments in infrastructure projects. In addition, we plan to increase our expenditures in the emerging Utica shale play to $400 million from $300 million last year."

Hess did spend $750 million on infrastructure in 2012, so that could very well be the bulk of the decline. Details for infrastructure spending in North Dakota in 2013 were not provided. Lower spending is also the result of cost savings that will be realized from pad drilling. Well cost dropped almost 30% from $13.4 million in the first quarter of 2012 to $9.5 million in the third quarter of the year. Add spending less on infrastructure and the costs savings being realized on the development side and the results is much less spending, with similar activity.

Hess will operate 14 rigs in 2013. That's down from 16 in 2012.

The company operates the bulk of its acreage and has an average 67% working interests in approximately 800,000 net acres.

Phillips 66 Commits to Take 50,000 b/d of Bakken Crude

Crude Oil Transport Routes
Crude Oil Transport Routes

Phillips 66 has signed a five year take or pay contract with Global Partners for 91 million barrels of oil (50,000 b/d). Global will use its transportation system to deliver crude from North Dakota to Phillips 66 Bayway refinery in New Jersey. Moving crude this distance will likely cost the company somewhere between $10-15 per barrel over the life of the contract.

The transportation differential can be made up easily when you consider physical prices for Williston Sweet were trading below $80/bbl on the day the deal was announced. WTI was trading near $93/bbl and Brent Crude was trading over $110/bbl the same day.

"Global has established a 'virtual pipeline' for the reliable transportation of Bakken crude," said Tim Taylor, Executive Vice President, Commercial, Marketing, Transportation & Business Development of Phillips 66. "Our five-year agreement with Global assures us long-term access to advantaged crude for our Bayway refinery through what we believe is a cost competitive origin-to-destination supply system to the East Coast."

Phillips 66 has expanded facilities in the past few years to accept more crude from truck, rail, and barge across its refinery assets. The expansions will allow the company to deal for and source more crude from price advantaged areas in the US.

I believe this is the first firm commitment of this size to take Bakken crude to the East Coast. As highlighted in the slide above, Phillips 66 expects both the Bakken, Canada, and the Gulf Coast regions to provide sources of price advantaged crude.

Have You Seen the Bakken from Space?

Bakken Space Photo - NASA
Bakken Space Photo - NASA

The Bakken development is big enough to see from space. New photos from NASA show just how big the North Dakota oil boom really is. The play rivals metropolitan areas when it comes to visibility from space.

The photos were taken by the Suomi NPP Satellite in April of 2012. You can watch a video showing city lights around the world at nasa.gov

At the time the photos were taken, there were more than 210 rigs running in North Dakota and approximately 20 running in Eastern Montana.