Update On Badlands NGLs, LLC -- March 3, 2016

Updates

June 21, 2016: a reminder of past articles on same subject.

June 21, 2016: a presentation dated May 24, 2016. Read original post below. Here are additional data points; some may be old; some may be new:

• graphic updates amount of ethane rejected, stranded (it's a lot)
• Canadian tsunami of natural gas coming; Canada has announced no new western Canadian cracker

 

Original Post

 

For background to this update, see this post regarding the Badlands Ethane Project. A reader sent me a link to a recent Badlands NGLs, LLC, presentation, dated Februyary 24, 2016. I said earlier it was on the internet; I'm not sure it is.

This is the premise:

• the Bakken has a lot of ethane that is being rejected and put back into the natural gas stream
• the Bakken has a lot of ethane, period
• the Bakken is landlocked; Bakken NGL is physically and economically stranded
• restrictions on what is shipped by rail will only be tightened going forward
• a huge amount of value-added opportunities, think potatoes to potato chips
• opportunity for petrochemical project here in North Dakota (ethane to polyethylene; feedstock for almost all petrochemical products)

With that in mind, some other data points, and these really surprised me because the Bakken is known as an "oily" play, not a natural gas play:

• Permian wet gas contained 4 - 6 gallons of mixed NGL per MCF of raw wellhead gas
• Marcellus wet gas contained slightly higher concentrations of NGL
• The Bakken consistently produces 11 gallons of NG per MCF of raw gas

Williston ethane production outlook

• 2013: 175 MB/D
• 2015: 175 MB/D
• July, 2015: 250 MB/D
• 2020: 260 MB/D (forecast)

The actual Bakken NGL and ethane production in the summer of 2015 (well into the Saudi Surge/Slump). It is likely the 2020 forecast above is also low.

The Marcellus / Bakken "Disparity

• Marcellus producers have commitments of 300 MB/D ethane to Europe, India: take or pay
• Marcellus accounts for about 25%of European polyethylene capacity
• Europe and Indian PE manufacturers pay BTU ethane price plus 35 cents/gallon transportation costs
• in contrast, the value of North Dakota ethane produced and sold bears no resemblance to the market-plus-freight price realized by Marcellus

Current Bakken NGL distribution

• ONEOK: 111 MB/D
• Vantage: 20 MB/D
• Tioga Lateral: 3 MB/D
• WBI: 5 MB/D
• Northern Border: 100 MB/D 
• Total: 240 MB/D
• Local consumption and takeaway capacity (rail/truck): 135 MB/D
• Ethane probably 25% of the 100MB/D being taken away
• Ethane content of 25% is problematic for both rail/truck

It gets worse: risk of Williston Basin ethane being physically stranded in five years

• Northern Border is the sole Williston Basin NG pipeline outlet
• by 2020, Williston Basin ethane could result in exceed what Northern Border could handle
• by 2020, Bakken NGLs - Y grade likely to be stranded: due to "tsunami" of NGL being produced; ONEOK's takeaway capacity would almost need to double and in light of low NGL prices, not likely to happen

The Tsunami

• From Canada, northwest of the Bakken: Horn River, Montney, Duvernay (British Columbia)
• Montney, conservative case/high case: 449 / 645 TCF of natural gas
• Duverney: 443 Tcf of natural gas
• Duverney, alone: liquid production could grow from 27,000 bopd (2015) to 320,000 bopd ten tens from now (2025)
• number of new Western Canadian crackers announced/planned: zero

To date: only one new western North America cracker/PE license announced: Badlands ND/Badlands Shangri-La

• purchase C1 through C4
• crack C2 and produce polyethylene
• sell purity C3 and I-C4
• isomerize N-C4 and sell I-C4
• return "lean gas" to the pipeliens, thereby reducing BTU content

Badlands Plans

• two world-class facilities
• two locations: North Dakota and "Shangri-La"
• first: Shangri-La -- "on the water" -- 36 months to hydrocarbons
• second: North Dakota -- not "on the water" 

Technology

• cracker: Technip -- market leader; building 3 plants in US for Sasol, CP Chem, and Dow
• PE: Univation -- market leader, owned by Dow
• captive co-monomer manufacture: "name brand"
• product off-take: "name brand"

Agreements:

• feedstock agreements in advanced discussions in both locations
• EPC: agreement in principal; lump sum turn key
• financing: advanced stage
• site selection: advanced stage; Shangri-La site close to selection; North Dakota close to selection

Shangri-La Facility Cracker: Technip cracker

• Technip cracker: same design being built for SASOL and Chevron Phillips
• 94 modules fabricated in Mexico; delivered "on the water" to Gulf Coast
• Shangri-La Facility PE
• 2 Univation PE reactors; up to 24 different PE products
• according to Univation (formerly Union Carbide), Badlands will produce the most diverse product line of any Univation licensee

North Dakota PE: identical Univation reactors and capacity

• over 500 permanent and high-paying ND jobs