Another Company Interested In LNG Plants In North Dakota? -- October 21, 2014

In long posts, there will typographical and factual errors. If this issue is important to you, please go to the linked sources.

A reader caught this one:

Stabilis Energy and Flint Hills Resources announced the formation of a joint venture to build up to five liquefied natural gas (LNG) liquefiers serving oilfield fuel consumers on October 1, 2013.  In addition to its first LNG production facility in George West, Texas, (Eagle Ford Shale) and plans for the next location in Odessa, Texas (Permian Basin), the venture is pursuing site purchases in North Dakota (Bakken Shale) and other domestic oilfield markets for LNG production facilities that could begin production between 2016 and 2018.

From its website:

The joint venture between Stabilis Energy and Flint Hills Resources was formed to build up to five LNG production facilities in the oilfield sector. Stabilis Energy will utilize its strong customer relationships and reputation in the North American oilfield sector to lead marketing, transportation and logistics, field services, and plant operations for the venture. Flint Hills Resources will provide its experience as a leader in the processing, distribution and marketing of traditional and alternative fuels to the venture. Stabilis Energy and Flint Hills Resources share management committee responsibilities.

From wiki:

The LNG industry developed slowly during the second half of the last century because most LNG plants are located in remote areas not served by pipelines, and because of the large costs to treat and transport LNG. Constructing an LNG plant costs at least $1.5 billion per 1 mmtpa capacity, a receiving terminal costs $1 billion per 1 bcf/day throughput capacity and LNG vessels cost $200 million–$300 million.

In the early 2000s, prices for constructing LNG plants, receiving terminals and vessels fell as new technologies emerged and more players invested in liquefaction and regasification. This tended to make LNG more competitive as a means of energy distribution, but increasing material costs and demand for construction contractors have put upward pressure on prices in the last few years. The standard price for a 125,000 cubic meter LNG vessel built in European and Japanese shipyards used to be US$250 million. When Korean and Chinese shipyards entered the race, increased competition reduced profit margins and improved efficiency—reducing costs by 60 percent. Costs in US dollars also declined due to the devaluation of the currencies of the world's largest shipbuilders: the Japanese yen and Korean won.

From FERC:

There are more than 110 LNG facilities operating in the U.S. performing a variety of services. Some facilities export natural gas from the U.S., some provide natural gas supply to the interstate pipeline system or local distribution companies, while others are used to store natural gas for periods of peak demand. There are also facilities which produce LNG for vehicle fuel or for industrial use. Depending on location and use, an LNG facility may be regulated by several federal agencies and by state utility regulatory agencies.

LNG in North Dakota, press release earlier this year (May 7, 2014):

North Dakota LNG, LLC (NDLNG), the newest member of Prairie Companies, LLC’s, portfolio of oil and gas service businesses, joined North Dakota Governor Jack Dalrymple and other state officials at an event Wednesday in the State Capitol Building to announce the arrival of a liquefied natural gas (LNG) production facility. Located in Tioga, North Dakota, the plant will be the first-to-market in the state to produce 10,000 gallons per day (GPD) starting in Summer 2014.

A phase two facility is scheduled to be operational in the fourth quarter of 2014 and capable of producing 66,000 GPD. NDLNG targets the drilling, fracking and transportation sectors of the unconventional oil and gas industry and will help meet the need for a cost-effective power source by converting natural gas feedstock into value-added liquid fuels.

“North Dakota LNG is proud to announce it will be the first LNG liquefaction plant in operation for North Dakota,” said Patrick Hughes, chief executive officer at North Dakota LNG.

“This historic venture will allow NDLNG to quickly provide oil and gas operators in the Bakken and across North Dakota with a cost-effective and reliable source of alternative fuel, thereby reducing operating expenses, while also creating new markets for value-added natural gas fuel produced in the State.”

This story, I believe, was posted on the blog earlier this year. Reuters is reporting that LNG may be next on American rails:

"Everyone is talking about moving gas by rail," said David Demers, chief executive officer of Westport Innovations, which is developing technology for natural gas-powered locomotives.

Demers said Berkshire Hathaway's BNSF was one railroad considering the move.
BNSF declined to comment on its plans, but a spokeswoman said it would take time for any development of gas by rail.

Transporting gas by rail, most likely as cryogenic liquefied natural gas (LNG), faces obstacles. The technology is in its infancy, and so far no tank car is permitted to carry the fuel on U.S. rails. Nor are there enough plants that convert natural gas to LNG to support a robust gas-by-rail market, experts said.

More-volatile liquids like ethylene and propane already travel on the rails in growing volumes. But as concerns about the safety of crude by rail intensify, regulators are exercising extreme caution with uncertified fuels like LNG, said executives involved in developing the technology.