Report Volume XXIX, Number 13 March 1, 2018

February 26, 2018

INDUSTRY NEWS (Houston, TX) – A consortium behind the proposed Constitution natural gas pipeline from Pennsylvania to New York asked U.S. federal energy regulators recently to review their order related to a water quality permit that had been denied for the project.

The Federal Energy Regulatory Commission (FERC) on Jan. 11 rejected the request by Constitution Pipeline, a consortium headed by Williams Cos, to overturn New York’s denial of the water permit.

“New York failed to act within ‘a reasonable period of time’ on Constitution’s application,” Constitution said in a statement.



INDUSTRY NEWS (Tulsa, OK) – Oneok recently announced plans to invest approximately $1.4 billion to construct a new pipeline, and related infrastructure, to transport natural gas liquids (NGLs) from the Rocky Mountain region to the company’s existing Mid-Continent NGL facilities.

The Elk Creek Pipeline – an approximately 900-mile, 20-inch diameter pipeline that is expected to be completed by the end of 2019 – will have the capacity to transport up to 240,000 barrels per day (bpd) of unfractionated NGLs from near the company’s Riverview terminal in eastern Montana to Bushton, Kansas. The Elk Creek Pipeline is expected to cost approximately $1.2 billion, with related infrastructure costs expected to total approximately $200 million. The pipeline will have the capability to be expanded to 400,000 bpd with additional pump facilities.

“The existing Bakken NGL and Overland Pass Pipelines are operating at full capacity. Additional NGL takeaway capacity is critical to meeting the needs of producers who are increasing production and are required to meet natural gas capture targets in the Williston Basin,” said Terry K. Spencer, ONEOK president and chief executive officer. “The Elk Creek Pipeline will strengthen ONEOK’s position in the high-production areas of the Bakken, Powder River and Denver-Julesburg regions and also provide additional reliability and redundancy on our NGL system.”

The Elk Creek Pipeline is anchored by long-term contracts with terms ranging between 10 to 15 years totaling approximately 100,000 bpd, which is supported primarily by minimum volume commitments. In the aggregate, and based on these contracts for 100,000 bpd, this project is expected to generate adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) multiples of four to six times.

ONEOK expects to finance the Elk Creek Pipeline with a combination of new equity, including approximately $450 million of net proceeds received from common stock issued during 2017 under its “at-the-market” equity program, with cash from operations in excess of dividends and short- and long-term borrowings.

This project is part of ONEOK’s $3.0 billion to $3.5 billion of potential capital-growth projects. Additional projects that are expected to have similar adjusted EBITDA multiples to this project, which are in the late stages of development, are expected to be announced when sufficient supply commitments are secured. ONEOK expects to finance its additional capital-growth projects in 2018 and well into 2019 with cash generated from operations and short- and long-term borrowings.



INDUSTRY NEWS (San Antonio, TX) – A new pipeline system proposed by Andeavor Logistics would transport growing volumes of natural gas liquids from the core of the Bakken to a rail terminal west of Belfield.

The company, formerly known as Tesoro Logistics, has applied to the North Dakota Public Service Commission to construct 44 miles of new pipeline in McKenzie, Billings and Stark counties.

The project would transport mixed natural gas liquids from the Watford City area to an Andeavor gas processing plant near Belfield, where the liquids would be separated into products such as ethane, propane, butane and natural gasoline.

The products would then be transported by pipeline to the Andeavor Fryburg Rail Terminal and loaded onto rail cars.

North Dakota produces more than 400,000 barrels of natural gas liquids per day, according to estimates from Justin Kringstad, director of the North Dakota Pipeline Authority.

Kringstad projects that natural gas liquids production will more than double by the 2030s, ranging from 800,000 to 1 million barrels per day.

“Our goal here is to provide an outlet for the natural gas liquids to get to market,” said Destin Singleton, a spokeswoman for Andeavor.

The project involves the construction of three pipeline segments that total 44 miles plus the conversion of 42 miles of the Andeavor BakkenLink crude oil pipeline into natural gas liquids service. The project would collect natural gas liquids from the Oasis Wild Basin natural gas processing plant that’s being expanded near Watford City.

The pipeline initially would transport 15,000 barrels per day and could be expanded to 34,000 barrels per day.

The entire project, which includes some modifications to the Belfield gas plant, the rail terminal and pipeline connections, is estimated to cost from $140 million to $150 million, according to Andeavor.

A company news release said partial operations are projected to begin in late 2018 with full operations starting in early 2019.

Developing natural gas liquids infrastructure is part of the solution to reducing flaring in North Dakota, according to Kringstad, who said additional investments also are needed in gathering pipelines and processing plants, he said.

The Public Service Commission has not scheduled a hearing on Andeavor’s proposal.



INDUSTRY NEWS (Houston, TX) – Energy Transfer Partners LP is considering constructing a new crude oil pipeline from the Permian basin in Texas to Nederland, Texas, a company executive said on a fourth-quarter earnings call recently.

The company said it was “aggressively pursuing a larger project” without giving specific details.

“We’re listening to our customers and we’re going to build whatever capacity is warranted after those discussions,” Thomas Long, chief financial officer said.

Shale producers have flocked to the Permian because of its prolific resources and relatively cheap production costs, boosting demand for takeaway capacity. Production in the Permian is expected to rise by 75,000 barrels per day to 3 million bpd in March.

Energy Transfer Partners also said it brought Phase 1 of its 100,000 bpd Permian Express 3 pipeline online in the fourth quarter, with additional volumes expected to come online later this year. The company said it is evaluating an additional 200,000 bpd expansion on the line that flows from the Permian to Nederland.

On its the 30-inch (76-cm) segment of its Bayou Bridge crude pipeline from Nederland to Lake Charles, Louisiana, the company said it transported an average of 145,000 bpd in the fourth quarter.

On the 24-inch segment of Bayou Bridge from Lake Charles to St. James, Louisiana, construction was now underway and commercial operations were expected to begin in the second half of 2018, Energy Transfer Partners said.

Industry News, Reports

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