Growing midstream: more ‘liquids-based in the midstream space’

big pipe

Many years ago, MDU Resources Group called itself a “multidimensional natural resource company.” The description was more than fitting since the Bismarck-based corporation had a utility division that offered electric generation and distribution along with natural gas distribution. The company also operated an interstate natural gas transmission pipeline and storage system, as well as an oil and natural gas exploration and production company, plus a utility construction services unit. The corporation also was in the coal business.

These things are still very much part of the MDU Resources portfolio with the exception of the coal business. In the early 1990s, the company switched out of the coal business and into the aggregate mining and construction business.

A multidimensional natural resource company, indeed.

Company descriptors have come and gone over the years but the core elements of the description have always been the same. At the close of 2011, the company generated over $4 billion in annual revenues; and offers a portfolio of services that are essential to energy and transportation infrastructure.

Now, in 2012, the company announced plans to expand even more into diverse natural resource development to include diesel fuel, processing and treating natural gas, and pipelining crude oil.

Collectively, these activities are identified in the energy industry as “midstream.” The pipeline segment of the corporation, now called WBI Energy, is where you will find this exciting new growth.

In a May 2012 news release announcing an agreement to purchase an interest in some existing natural gas and oil midstream assets, Terry Hildestad, MDU Resources’ president and CEO, was even poetic about this growth. “This transaction is an important step forward in executing our strategy to become more liquids-based in the midstream space,” Hildestad stated.

This summer, WBI Energy completed construction of the Stateline Pipeline, connecting the output of the two natural gas processing plants to the Northern Border Pipeline and pushing the company's maximum pipeline capacity over the one billion cubic feet per day mark.

This summer, WBI Energy completed construction of the Stateline Pipeline, connecting the output of the two natural gas processing plants to the Northern Border Pipeline and pushing the company’s maximum pipeline capacity over the one billion cubic feet per day mark.

And, liquids based in the midstream space is exactly what’s happening. Diesel fuel, natural gas liquids (NGLs) and crude oil are the prime liquids we’re talking about.

In late February, the company announced its intent to explore the feasibility of jointly building and operating a diesel topping plant in western North Dakota. The facility would process Bakken crude oil and market the resulting diesel within the Bakken region.

Through the spring and summer, the project has been moving forward at a swift and successful pace.

A plot of land has been secured with an option to purchase in Stark County about four miles southwest of Dickinson, adjacent to the Burlington Northern/ Santa Fe railroad. In early July, the Stark County Planning and Zoning Board reviewed and recommended a rezoning plan on the proposed plant site and the Stark County Commission approved the recommendation to rezone the land from agricultural to industrial.

“So far, we’ve been involved mostly in paperwork,” says John Stumpf, vice president of strategic planning for MDU Resources and one member of a broad cross-corporation team working on the project. “The plant design and primary engineering has been completed, and the next step includes completing a constructability study.”

Another necessary step is obtaining an air quality permit, which is planned for submission to the North Dakota Department of Health in early September. The facility will operate under air and water permits issued by the State of North Dakota.

Assuming timely receipt of the permits, construction could begin next spring, with completion targeted for mid-year 2014. If the plant is built, it would operate as an independent jointly owned Limited Liability Corporation (LLC) with a governance group representing all investing owners of the facility. At this point, MDU Resources is joined by Calumet Refining, LLC in the project.

The other “liquids” in the midstream space are NGLs and crude oil. WBI Energy announced an agreement in May to purchase a 50 percent undivided interest in Whiting Oil and Gas Corporation’s oil and natural gas midstream assets near Belfield, N.D. in the Bakken area.

The facilities include a newly constructed, state-of-the-industry natural gas processing plant that extracts NGLs from the rich gas stream, a natural gas gathering pipeline system connected to the plant, and a natural gas residue line that ties into the WBI Energy pipeline system. Also included are a crude oil gathering system, a crude oil storage terminal, and a crude oil pipeline that connects the terminal to the Bridger Pipeline. Whiting will continue to operate the facilities.

The Belfield natural gas processing plant has an inlet processing capacity of 35 million cubic feet per day. The oil terminal is currently under construction, with completion expected in the third quarter of 2012. It will have a storage capacity of 20,000 barrels of oil.

The natural gas processing plant was just put into service in December 2011 so, as a new facility, the volumes fed into the plant will continue to grow as more wells are drilled and field production is connected to the plant. In mid-August, the plant was processing approximately 13 million cubic feet per day of rich natural gas, which is a little over one-third of its full capacity of 35 million cubic feet per day.

Diesel Topping Plant: Quick Facts

Capacity:

  • Input of 20,000 barrels/day of crude oil.
  • Output of 9,000 to 10,000 barrels/ day of diesel fuel or kerosene.
  • Remaining byproducts (naphtha and atmospheric bottoms) will be shipped by rail to other facilities for further processing into other products which include lubricating oils, solvents and gasoline.

Operations:

  • Facility will operate 24 hours per day, seven days a week.
  • Ninety to 100 employees.
  • Plant will be a state-of-the-industry facility utilizing the best available emission-control technology.
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