Random Note About Cheniere Energy -- LNG -- Implications for the Bakken, North Dakota, USA

Back on August 24, 2011, I posted Jim Cramer's top oil and gas picks.

On that date, Cheniere Energy (LNG) was selling for $7.12. From there Cheniere took a rather sudden fall to a low of $4.00 on October 3. Yes, one could have bought LNG at $4.00 earlier this month.

Following landmark news earlier this week that the US will be exporting liquid natural gas through the terminal owned by Cheniere, Cheniere's stock has turned around. Today, I see Cheniere selling for almost $11, up about 3.5 percent, on an otherwise flat day for the market.If you bought at $4 and it gets to $12, you've tripled your money in a month. (Disclaimer: this is not an investment site; it is for information, education, and entertainment. I hold no shares of LNG or ONEOK. Nor do any of my relatives as far as I know.)

ONEOK Partnerships is building three new cryo liquid natural gas processing facilities west of Williston.

By the way, when you go back to that link you will see a nice comment regarding these plants. This comment was particularly interesting: ".... while significant to the local economy, [the new ONEOK natural gas processing plants] have relatively small capacity."

The link to the US Energy Information Administration on natural gas processing plants in the US: 2010 update --

Some data points from that update:

• There are 493 operational natural gas processing plants in the US
• Plants are getting bigger: operating capacity nationwide increased 12 percent; the number of processing plants in the lower 48 decreased by 8 percent
• Between 2004 and 2009, the average plant capacity increased from 114 million cubic feet to 139 million cubic feet (each ONEOK plant west of Williston will be rated 100 million cubic feet)

Two comments: "relatively small" might be a bit misleading. Based on the data points and the map at the link, one could argue that each plant is about average, and taken as a group, they would be well above average. Whatever.

More important is the comment that "while significant to the local economy..." -- wow, that is so true. I think one of the things that folks forget when talking about the Bakken, the vast amount of production is coming from six or seven counties in western North Dakota. The population of the entire state is not much more than 600,00 about half the population of my current home, San Antonio. And in these few counties, there are only two towns of any real size, Dickinson and Williston (Minot is just east of the activity for the moment), and they only have about 40,000 residents together.

[One of the nice things about the Bakken is that like Linde, who is building these plants, for the most part, the operators are second or third tier. It was the likes of Continental Resources, Whiting, Brigham, Northern Oil and Gas,  Kodiak Oil and Gas, and others that promoted the Bakken from the beginning, not XOM or CVX. The Bakken  has allowed some small players in oil and gas to move to a new level. Of course, the big oil service companies have always been here: SLB, HAL, BHI, Weatherford, etc.]

But, again, I digress.

I believe the construction costs of these three natural gas plants is about $150 million apiece. In 2010, Williston set a record with $100 million in building permits; in 2011, Williston will triple that record with $300 million in building permits.

Each of these three plants will have about the same capacity of the Hess facility at Tioga (110 million cubic feet) which is a fairly significant operation for this area. 

So, yes, these facilities during the construction phase, and then during operations, will have a huge impact on the local economy.

Oh, by the way, the natural gas you see flaring: the value of the natural gas compared to the total value of the Bakken production is four (4) percent.