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Thursday, March 3, 2016

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

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