NG

Bakken Natural Gas
Source: a reader from North Dakota
Undated, but probably received in late-2011 to mid-2012

The media is incapable of explaining the natural gas situation in the Bakken.

First off, natural gas from the Bakken CAN NOT BE DIRECTLY COMPRESSED into a natural gas pipeline. The gas streams coming out of the wells are not pure enough, as they are rich in other constituents like ethane, propane, butane, natural gasoline as well as water vapor, some sulfur compounds, some nitrogen, and some noble gases like neon, helium, argon, and even krypton.

Directly injecting this type of stream into an interstate natural gas pipeline leads to condensate issues (with propane, butane, natural gasoline and even water), corrosion and damage to compressors, which would result in major leaks and significant hazards. An interstate natural gas pipeline companies will not tolerate the safety issue with their pipelines and compressors stations leaking and then blowing up.

In some natural gas fields, the field delivers sufficiently high methane with few other constituents so that no processing is required. Not in the Bakken. The extra constituents like ethane, propane, butane, natural gasoline, are actually a very good problem, as they are worth much more than the methane (pure nat gas).

The problem is that it takes 2 years to build a natural gas processing plant and $300 million per plant.

Each of these plants creates 80 permanent jobs (if they are 100 mmcfd capacity).

There is not currently enough natural gas plant capacity in the state to handle all the gas, even if every well was connected.

Just one company, ONEOK, has announced five plants in the state:

    Stateline I (west of Williston), operating
    Stateline II (west of Williston), under construction
    Garden Creek I (near Watford C), operating
    Garden Creek II, under construction
    Garden Creek III, just announced, in permitting

That's $1.5 billion in investment just by ONEOK for natural gas processing plants. Other companies are also building or expanding nat gas processing plants: Hess in Tioga, Plains All America near Ross, and a couple of smaller plants near Belfield.

All the ethane, propane, butane, and natural gasoline (Natural Gas Liquids) has to be shipped out, preferably by pipeline. ONEOK is building a pipeline from Williston to near Cheyenne Wyoming, where it will be connected to another raw NGL pipeline to ONEOK's chemical complex in Kansas. There, each of the different types of NGLs are separated, with ethane going in another dedicated pipeline to Texas (for making plastics), propane in another dedicated pipeline (for heating, export or chemicals), butane (for heating), and natural gasoline (for gasoline and other uses). With all the connection lines from the wells to the natural gas processing plants, ONEOK is spending over $3 billion in new capital just in North Dakota.

Hess's plant in Tioga is becoming much more sophisticated, as Hess will be able to separate the ethane now at that plant, and is building an ethane pipeline north and west to Alberta's chemical alley, where it will be converted to ethylene and then polyethylene. Hess will ship out the butane, propane, and natural gasoline in railcars.

Again, the flaring issue is simply NOT the connection of wells to interstate pipelines. There is not enough natural gas processing capability in North Dakota to handle everything. Building the plants takes time. At least one new plant is projected every year until 2020. 

Reports
October 18, 2017: Haynesville natural gas reserves almost half what Qatar has

May 30, 2017: nice update here.

August 30, 2015: EIA report on US production/consumption of natural gas. Take a look at the graph at the link. Up until 1985, domestic natural gas production pretty much kept up with consumption (probably because coal took up the slack). However, after 1985, the delta between natural gas consumption and production began to widen, until the early 2000's when the delta maxed out -- then, all of a sudden, the gap between consumption and production started to narrow so that by 2010 / 2011, the gap was very, very narrow. Canada could easily supply what additional national gas was needed. Most interesting: remember that starting about this same time, utilities were switching from coal to natural gas about as fast as economically feasible. 

May 14, 2013: RBN Energy -- Houville to blast past Conway; will be 2nd largest NGL processing center behind Texas/Louisiana. Excellent summary, as usual. 

February 28, 2013: analysis of LNG exports.

Updates

July 27, 2017: natural gas glut.

October 21, 2012: NY Times -- after the boom in natural gas


Original Post

The Bakken is primarily an oil story, but many of the companies drilling for oil in the Williston Basin are also involved in drilling for natural gas in other parts of the country.

It is becoming increasingly difficult to ignore natural gas at this site. To keep the focus on Bakken oil but yet make it easier to follow the natural gas story, I am consolidating natural gas stories at one site within the blog which can be easily accessed at the sidebar on the right, way at the bottom. I have room for one more page tab at the top, and natural gas seems to be a natural fit.



Update on US Natural Gas Industry, February 8, 2012, The Oil Drum,

Companies Focused on Natural Gas, Seeking Alpha, April 5, 2011 




List of major natural and gas deals over past two years, Reuters, April 5, 2011; in case the link is broken, I have cut and past the entire story at the bottom of this page.

MISCELLANEOUS

1 cubic meter equals 35.3147 cu ft.  So when NG is $ 400 per MCMeter this equals $ 11.33 per mcft 

RUSSIA AND NATURAL GAS




NEWS







Three Linde natural gas processing plants west of Williston will almost double natural gas processing capacity in state of North Dakota, October 22, 2011.



Dominion to build West Virginia processing, fractionation plant for Marcellus and Utica shale plays. August 5, 2011. 

EPA and SEC discussing fracturing regulations. RigZone. Bottom line: EPA may not shut down fracturing, but they may make it a lot more expensive for the industry in legal worries. August 2, 2011. 

Waste Management adds its 1,000th natural gas truck to its fleet, July 12, 2011. I wonder if The New York Times will pick up this story to run with its shoddy reporting of the natural gas industry.

WSJ transcript on when US will start shipping natural gas to Asia. Natural gas in Asia at $10; in US at $4.00. July 12, 2011.


Two unexpected gushers in Pennsylvania point out huge potential in the Marcellus and the natural gas fields in America in general, June 26, 2011.

The New York Times: Is Natural Gas the Next "Enron" Scam?, June 26, 2011. The article was a hoax or a scam. I was scammed.

Driving Utilities Away From Coal; This Is Why The "Big Boys" Are Buying Natural Gas Properties, June 20, 2011
Officials have identified 18 coal plants in North Dakota, Montana, Wyoming, and Colorado, in the court agreement that would have to be retired, retrofitted with new pollution reduction equipment or otherwise reduce emissions. Nationwide, more than 300 old coal plants could face required upgrades if the broader agreement is finalized, said Stephanie Kodish, an attorney with the National Parks Conservation Association.

Oklahoma Attorney General Scott Pruitt sued the EPA over the issue in May, citing costs of up to $2.5 billion to install "scrubbers" that would reduce pollution from the state's coal plants.

Pruitt said that could drive up utility rates by as much as 20 percent.<






Natural Gas Act of 2011, April 6, 2011.


Another oil and gas exploration and company, this time Shell, touts natural gas. March 25, 2011.

North Dakota oil producers burned a record 24 percent of all the natural gas produced in the state in 2010, an all-time high. March 17, 2011.
Oil companies burned 24.1 percent of the 10.5 billion cubic feet produced in January, the most natural gas flared in one month since December 2008, said Lynn Helms, director of the state Department of Mineral Resources. Gasses and vapors coming from the well increase the so-called flaring percentage to 29.5 percent, he said.

Flaring has increased in North Dakota with the explosion of oil development of the Bakken and Three Forks formations in the western part of the state. Companies and state officials say excess natural gas is wasted because of a lack of infrastructure in North Dakota and a glut in the market.

North Dakota pumped a record 113 million barrels of oil in 2010, shattering the high set a year earlier by 33 million barrels, state Industrial Commission records show. The state also produced a record 113 billion cubic feet of natural gas in 2010, up from 92.4 billion cubic feet the year before.
It is of interest that of the over 5,000 wells in North Dakota, only 720 are not hooked up to natural gas gathering system. Most likely the bulk of the natural gas flared is in the early stages of oil production from a given well. Over time, the well is tied into a natural gas gathering system. The question becomes whether the total amount is statistically important. Thirty percent of zero is zero, but sounds a lot worse than three percent of zero. I haven't seen numbers comparing total amount of natural gas flared in North Dakota compared to other fields, but my hunch is that it is a relatively small amount. If it was a huge amount, it would be profitable for the producers to capture much more of it. In other words, if the Bakken were a "Marcellus" natural gas shale, one can bet that natural gas would not be flared. In the big scheme of things, there is very little natural gas compared to the amount of oil being produced.


Natural gas pipeline approved in New York state; for the Marcellus. February 21, 2011.

SeekingAlpha: a case for natural gas. January 25, 2011.



Has floor for natural gas price risen?  $4.67 represents a 14% rise at the end of the year, 2010. January 9, 2011.

Finally, mainstream media agrees: power plants switching from coal to natural gas; turning point reached. December, 5, 2010; New York Times.

To cut "green-house" emissions, sea-going tankers may switch to natural gas. This could result in 10-fold jump in liquid natural gas powered shipping, November 15, 2010.

XOM and CVX see natural gas as fuel of the future, November 12, 2010.

US getting ready to ship liquid natural gas to China, November 12, 2010.

Encana: Another Pure Play Natural Gas Company, Presentation Will Download, October, 2010

Investing Opportunities in Natural Gas, Seeking Alpha, October 17, 2010

ONEOK: A Pure US Energy Play on Natural Gas, Seeking Alpha, October 15, 2010

The Century for Natural Gas, Seeking Alpha, February 2, 2010

Swimming in Natural Gas, Wall Street Journal, April 30, 2009

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THE NEW YORK TIMES/MSNBC ARTICLE

Over the weekend of June 25 - 26, 2011, the New York Times/MSNBC published a story suggesting that the economics of natural gas do not make sense, going so far as to call it an "Enron-like" scam.

My contention at the time was that the article was an outlier: it went against the grain of everything else I had been reading and everything else that I had been seeing with regard to natural gas. I don't argue that natural gas is extremely cheap and I have wondered how the companies have been able to make money on natural gas. However, the contention in the article that the companies are over-estimating their reserves is what caught my attention and that's where my problem with the article lies. I am not a financial analyst and so I pretty much stay away from that end of the argument.

It will be interesting to see how the New York Times/MSNBC article plays out. I will use the date (June 25-26, 2011) and the article as a marker, and start documenting data and stories that reflect both sides of the argument. I assume that, based on my biases and sources, most of my data and stories will favor the industry and not the referenced article.

For now, I don't plan to publish comments regarding this issue, but will bring ideas posted as anonymous comments up to this post if they add substance to the debate.

July 23, 2011: SeekingAlpha -- picks up my story about XOM looking to acquire more shale gas assets; EnCana a takeover target?

July 21, 2011: XOM looking to acquire more natural gas shale.

July 21, 2011: Marcellus production jumps; job opportunities soar.

July 18, 2011: Oh, now it MAKES sense! The New York Times article was about small independent shale gas companies that might go under. And yet another great rebuttal to shoddy reporting in the New York Times. I am impressed the Times published it.

July 14, 2011: BHP bought a $4.75 billion stake in a shale gas field in Arkansas. That marked the BHP's first move into the rapidly growing U.S. shale gas business. I doubt BHP would be spending that type of money if natural gas was a losing proposition. (BHP is an Australian company. My hunch is that non-US companies see US energy resources on sale due to cheap dollar.)

July 2, 2011: Record amounts of natural gas production in US. Something tells me producers are not selling natural gas at a loss.

July 1, 201: Market tinkering or shoddy reporting? RealClearPolitics.

June 30: USGS increases reserves estimates (natural gas and oil) in Cook Inlet, Alaska.  Natural gas increased from 2 tcf to 19 tcf.

June 29, 2011: SeekingAlpha -- Evidence is overwhelming -- the NY Times is "nuts."

June 29, 2011: Renewed confidence in CHK (shares soar in price) after CEO talks to Jim Cramer. 

June 28, 2011: Compilation of responses to the New York Times article. 

June 28, 2011: PennVirginia disappointed in three test wells in the Marcellus.

June 27, 2011: XOM's response to the New York Times article -- don't facts matter any more 

*************************************

Key Shale Natural Gas and Oil Deals (March, 2009 -- April, 2011)

NEW YORK, April 5 (Reuters) - Companies eager to capitalize on the shale revolution are buying up other companies that have deeds to land with access to reserves.

Two multibillion-dollar deals in the first quarter show the interest companies have in scooping up shale plays for the resources and technology.

Below are major shale gas and oil acquisitions:

APRIL 2011:

-- Marubeni Corp will pay Marathon Oil Corp about $270 million for a 30 percent stake in a U.S. shale oil project.

FEBRUARY 2011

-- PetroChina pays Encana Corp $5.4 billion for half of a shale gas project.

-- BHP Billiton pays Chesapeake Energy Corp $4.75 billion for gas reserves in the Fayetteville Shale in Arkansas.

DECEMBER 2010

-- South Africa's Sasol  pays $1.03 billion for a half share in Talisman Energy Inc shale gas property.

OCTOBER 2010

-- CNOOC Ltd agrees to pay Chesapeake Energy $1.08 billion in cash for one-third of its Eagle Ford shale in South Texas.

JUNE 2010:

-- India's largest listed company Reliance Industries will invest $1.36 billion in the U.S. shale gas assets of Pioneer Natural Resources.

MAY 2010

-- Royal Dutch Shell says it will pay $4.7 billion cash to buy privately held East Resources Inc, which controls 650,000 net acres (2,600 square kilometers) in the Marcellus Shale.

APRIL 2010:

-- British gas producer BG Group  said it would pay $950 million to buy a 50 percent interest in shale gas assets in Appalachia from EXCO Resources.

FEBRUARY 2010:

-- S.Korea's KOGAS invests $1.1 billion in developing Encana Corp's natural gas fields.

-- Canada's Progress Energy Resources Corp agreed to buy certain northeast British Columbia Foothills assets for about C$390 million ($366.2 million) from Suncor Energy.

DECEMBER 2009:

-- Exxon Mobil Corp announced its plan to buy XTO Energy Inc XTO.N for about $30 billion in stock. XTO's resource base is the equivalent of 45 trillion cubic feet of gas and includes shale gas, tight gas, coal bed methane and shale oil.

-- Ultra Petroleum Corp said it would pay about $400 million to an unnamed private company to buy 80,000 net acres in the burgeoning U.S. Marcellus Shale region, giving it about 250,000 net acres and a potential for 1,800 net drilling sites.

NOVEMBER 2009:

-- Denbury Resources Inc  said it would buy Encore Acquisition Co for $3.2 billion, creating a company with 426 million barrels of oil equivalent in proved reserves.

-- The acquisition would allow Denbury to leverage its enhanced-oil-recovery business into Encore's properties in Wyoming, Montana, and North Dakota, and would give it a large stake in the Bakken shale on the U.S.-Canada border.

JUNE 2009:

-- British gas producer BG Group paid Dallas-based Exco Resources Inc $1.3 billion for an interest in shale gas resources in Texas and Louisiana.

-- The companies said each would own 50 percent of a venture to which EXCO is contributing 120,000 acres of land in the Haynesville shale gas area and associated gas infrastructure.

MAY 2009:

-- Talon Oil & Gas LLC bought 60 percent of Denbury Resources Inc's  natural gas assets for $270 million.

-- Independent oil and gas company Quicksilver Resources Inc  agreed a joint venture with Italian energy giant Eni to develop its Barnett shale properties in Texas.

-- As part of the deal, Eni agreed to buy a 27.5 percent stake in Quicksilver's Alliance leasehold interests in the Fort Worth basin for $280 million.

MARCH 2009:

-- Independent Canadian oil exploration firm TriStar Oil & Gas and Crescent Point Energy Trust agreed to buy Talisman Energy Inc's lands in the prolific Bakken shale region of Saskatchewan and Montana for C$720 million ($567 million).

-- TriStar was later acquired by Petrobank Energy and Resources Ltd , which combined its own conventional oil assets with TriStar to create a new company called PetroBakken Energy Ltd.