Free Market Capitalism 101 -- The ONEOK Press Release, July 31, 2014

Updates

August 2, 2014: former CEO of ONEOK makes comments that back up the prescient comments of a reader posted below.

July 31, 2014: see comment below which I brought up here --

http://bismarcktribune.com/bakken/breakout/north-dakota-s-next-big-boom-capitalism/article_1aafdfbe-19bb-11e4-aad6-0019bb2963f4.html

OneOK is sitting on a treasure trove of NGLs and they know it. If they build fractionating plants here, much of their NGLs could go to a chemical complex built along the Missouri. That would catapult OneOK much higher, and set them up as the kingpin for the midstream industry.

Maybe a propane line to southern Minnesota or a natural gasoline (condensate) line to Alberta.

The really big pie in the sky, though, is if someone built a ethane cracker, to make ethylene, which is the building block molecule of the petrochemical complex.

OneOK doesn't recover ethane now (it stays with the methane and is burned) as the Houston market is flooded with ethane (OneOk loses money transporting ethane to Kansas and then Houston).

When OneOK starts recovering ethane, OneOK profits will go through the roof. In 2016, ethane exports begin the same way that LNG is exported. Another option is a $1 billion cracker along the Missouri north or Watford City. Pittsbugh is getting one near where Shell is building, and Pittsburgh considers it an economic salvation.

All kinds of chemical plants will locate near a cracker (polyethylene plastic plants, chemical plants etc).

I'm too tired tonight, but tomorrow, I will post the linked article above as a stand-alone post, so it's not lost. 
 

Original Post

1. Excluding non-profits, charities, and the like, most folks go into "business" to make a profit.
2. Risks vs benefits. Sometimes it's hard to calculate.
3. Favorable regulatory environment.
4. Find a "need"; attempt to meet that need.
5. Get really, really good at what you do.

Hopefully this will help explain ONEOK's announcement yesterday.

This is in response to a reader's comment in which he/she asked:

• is the flaring crackdown driving ONEOK's investment?
• does ONEOK have a de facto monopoly on natural gas processing in the Bakken?
• does the state favor one company building all these new plants?
• is the utility regulated? 

There are so many story lines in the ONEOK press release, I don't know where to begin.

A very minor story, but one that deserves attention: why are five of eight ONEOK natural gas processing plants located in one county in North Dakota? I've touched on it before; won't go into it again because my feedback was that I was nuts (which I probably am). LOL:

• Grasslands, Williams, 100 MMcf/d
• Stateline I, Williams, 100 MMcf/d
• Stateline II, Williams, 100 MMcf/d
• Garden Creek I, McKenzie, 100 MMcf/d
• Garden Creek II, McKenzie, 100 MMcf/d
• Garden Creek III, McKenzie, 120 MMcf/d -- to be completed in 2015* (ahead of schedule)
• Lonesome Creek, McKenzie, 200 MMcf/d -- announced July 14, 2014; to be completed in 2015
• Demicks Lake, McKenzie, 200 MMcf/d -- announced July 30, 2014; to be completed in 2016

Those are all ONEOK plants. I vividly recall the day I drove by Stateline I with my dad, touring the back roads of the Bakken. I had no idea what was being built; the local/regional newspapers were not reporting. It was completely under the radar scope. That was one of just a handful of "things" that really, really piqued my interest in the Bakken. These plants are not trivial in scope. I think there were 200 brand new pick-ups at the job site when Stateline I was being built. I think it took about a year. A lot of great paying jobs.

I was just learning about all this. I was inappropriately excited. A reader wrote me to tell me to settle down; in the big scheme of things, these were very small plants compared to the processing plants in Qatar. LOL. Qatar. Like I want to go there.

Qatar. Pronounced "Kotter." Sort of. Closer to "cutter."

Welcome Back Kotter Theme Song
Answers to those questions:

• is the flaring crackdown driving ONEOK's investment? No, profits drive ONEOK's investment
• does ONEOK have a de facto monopoly on natural gas processing in the Bakken? No
• does the state favor one company building all these new plants? No
• is the utility regulated? Yes and no ("everything" is regulated; but profits are not regulated for these plants, as far as I know, unless you consider tax burden a type of "regulation")