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Released April 25, 2013 | DENVER, COLORADO
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Project developers are dancing as fast as they can. Speakers and attendees at an Oil & Gas conference last week said that the development of projects to gather, process, store and transport crude oil, natural gas and natural gas liquids (NGLs) produced in North Dakota and Colorado was moving at a brisk pace.
According to Industrial Info's North American Project Database, about $5.5 billion of projects to gather, process, store or transport crude oil, natural gas or NGLs are in active stages of development in North Dakota and Colorado. For more on rising domestic crude oil production in these and other states, see April 22, 2013, article - U.S. Crude Oil Production Set to Surpass Imports in 2013. For more on U.S. natural gas and NGL production trends, see April 19, 2013, article - Surge in U.S. Natural Gas Production to Keep Prices Low, and April 24, 2013, article - U.S. NGL Production Slated to Soar, Prolonging Producers' Price Pain.
Click on the image at right to see scheduled project spending in North Dakota and Colorado on infrastructure to gather, process, store or transport crude oil, natural gas or NGLs.
The regional build-out of hydrocarbon infrastructure in Colorado and North Dakota reflects broader national investment trends, said Industrial Info's Jesus Davis, who is vice president of research for the Oil & Gas Terminals, Transmission and Production industries. "The national build out really got started in 2011, accelerated dramatically last year, and is scheduled to continue at a rapid pace for this year," he said in an interview.
"Regarding NGLs, a lot of project activity is tied to the nation's NGL hub in Mont Belvieu," said Davis, who did not speak at last week's conference. "Regarding crude oil, we're seeing a lot of pipeline and storage capacity around Cushing, Oklahoma--bringing crude oil there, storing it there, or moving it from there to refineries."
Click on the image at right to see scheduled project spending on U.S. hydrocarbon infrastructure from 2005 through 2017.
Though crude oil prices have softened a bit over the last year, continued relatively high prices for crude oil are driving a lot of scheduled spending on infrastructure in Colorado and North Dakota, speakers told about 250 attendees at the 7th Annual Platts Rockies Oil & Gas Conference, held here April 15-16. But participants recognized how rapidly industry projections can change: Last year at this time, crude oil was priced at about $104 per barrel, natural gas prices had slumped to under $2 per million British thermal units (MMBtu), and NGL prices averaged a respectable $1.25 per gallon. But today, prices for crude oil and NGLs have fallen while gas prices have roughly doubled. Reflecting how quickly industry projections, including price forecasts, can change, more than one speaker reminded the conference that it used to be called the Rockies Gas & Oil conference.
But several speakers at this year's conference discussed investments in infrastructure to gather, process, store and transport hydrocarbons out of the Williston and Denver-Julesburg basins. For example, John Ford, an executive at Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas), told attendees that his company was investing in oil takeaway capacity and gas-processing capacity to keep up with expanding hydrocarbon production in Colorado. Anadarko is expanding its compression, gathering and processing infrastructure in the Centennial State. Later this year, it is scheduled to bring a crude-oil rail terminal online. It has an interest in the Front Range NGL Pipeline, which is scheduled to begin operations by the end of the year. And in early 2014, its Lancaster Gas Processing plant is expected to begin operations.
Michael Lutz, vice president of global commercial for Hess Corporation (NYSE:HES) (New York, New York), told attendees his company was making so many capacity additions to its Tioga complex in North Dakota that it was "effectively replacing it." The company is investing about $325 million to more than double the processing capacity of its Tioga Gas Plant. Also, Hess is investing in an NGL rail terminal at Tioga capable of loading up to 30,000 barrels per day (BBL/d).
But Lutz said that about 30% of the natural gas produced in North Dakota is flared, because there is an inadequate midstream infrastructure to process it and transport it to markets: "Pipeline takeaway capacity of about 3.2 billion cubic feet per day (BCF/d) is about right. The gathering pipelines are the current system bottlenecks. Regarding NGL transportation capacity, pipeline capacity of about 260,000 BBL/d is a little short, which is why we we're using truck and rail transportation."
Lutz said that other hydrocarbon infrastructure challenges in North Dakota, including rig scheduling, right-of-way issues, permitting delays, competition for capital with production, and the surging production that comes from multi-pad drilling. The Hess executive cited projections from the North Dakota Industrial Commission that nearly 35,000 new wells will be drilled in the state over the next 18-20 years, which would necessitate an investment of about $35 billion in gathering systems. He presented data showing how gas processing could improve the overall returns for producers by more than 15%, but acknowledged it will be challenging to capture that value economically.
Over in Colorado, DCP Midstream LLC (NYSE:DPM) (Denver, Colorado) is making big investments to expand its gathering and processing infrastructure, Kevin Williams, the company's senior vice president for its North Business Unit, told the conference. In the coming years, DCP plans to invest $3 billion to $4 billion to build gas and NGL gathering and processing "super systems" in Colorado and other states. DCP has several midstream projects under way in Colorado, and by 2016 it expects to invest more than $1 billion building and expanding its gathering and processing infrastructure in that state. Williams said, "We're rocking and rolling in the Denver-Julesburg Basin. We're creating a super system there, and we're very excited about the future of this basin."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
According to Industrial Info's North American Project Database, about $5.5 billion of projects to gather, process, store or transport crude oil, natural gas or NGLs are in active stages of development in North Dakota and Colorado. For more on rising domestic crude oil production in these and other states, see April 22, 2013, article - U.S. Crude Oil Production Set to Surpass Imports in 2013. For more on U.S. natural gas and NGL production trends, see April 19, 2013, article - Surge in U.S. Natural Gas Production to Keep Prices Low, and April 24, 2013, article - U.S. NGL Production Slated to Soar, Prolonging Producers' Price Pain.
Click on the image at right to see scheduled project spending in North Dakota and Colorado on infrastructure to gather, process, store or transport crude oil, natural gas or NGLs.The regional build-out of hydrocarbon infrastructure in Colorado and North Dakota reflects broader national investment trends, said Industrial Info's Jesus Davis, who is vice president of research for the Oil & Gas Terminals, Transmission and Production industries. "The national build out really got started in 2011, accelerated dramatically last year, and is scheduled to continue at a rapid pace for this year," he said in an interview.
"Regarding NGLs, a lot of project activity is tied to the nation's NGL hub in Mont Belvieu," said Davis, who did not speak at last week's conference. "Regarding crude oil, we're seeing a lot of pipeline and storage capacity around Cushing, Oklahoma--bringing crude oil there, storing it there, or moving it from there to refineries."
Click on the image at right to see scheduled project spending on U.S. hydrocarbon infrastructure from 2005 through 2017.Though crude oil prices have softened a bit over the last year, continued relatively high prices for crude oil are driving a lot of scheduled spending on infrastructure in Colorado and North Dakota, speakers told about 250 attendees at the 7th Annual Platts Rockies Oil & Gas Conference, held here April 15-16. But participants recognized how rapidly industry projections can change: Last year at this time, crude oil was priced at about $104 per barrel, natural gas prices had slumped to under $2 per million British thermal units (MMBtu), and NGL prices averaged a respectable $1.25 per gallon. But today, prices for crude oil and NGLs have fallen while gas prices have roughly doubled. Reflecting how quickly industry projections, including price forecasts, can change, more than one speaker reminded the conference that it used to be called the Rockies Gas & Oil conference.
But several speakers at this year's conference discussed investments in infrastructure to gather, process, store and transport hydrocarbons out of the Williston and Denver-Julesburg basins. For example, John Ford, an executive at Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas), told attendees that his company was investing in oil takeaway capacity and gas-processing capacity to keep up with expanding hydrocarbon production in Colorado. Anadarko is expanding its compression, gathering and processing infrastructure in the Centennial State. Later this year, it is scheduled to bring a crude-oil rail terminal online. It has an interest in the Front Range NGL Pipeline, which is scheduled to begin operations by the end of the year. And in early 2014, its Lancaster Gas Processing plant is expected to begin operations.
Michael Lutz, vice president of global commercial for Hess Corporation (NYSE:HES) (New York, New York), told attendees his company was making so many capacity additions to its Tioga complex in North Dakota that it was "effectively replacing it." The company is investing about $325 million to more than double the processing capacity of its Tioga Gas Plant. Also, Hess is investing in an NGL rail terminal at Tioga capable of loading up to 30,000 barrels per day (BBL/d).
But Lutz said that about 30% of the natural gas produced in North Dakota is flared, because there is an inadequate midstream infrastructure to process it and transport it to markets: "Pipeline takeaway capacity of about 3.2 billion cubic feet per day (BCF/d) is about right. The gathering pipelines are the current system bottlenecks. Regarding NGL transportation capacity, pipeline capacity of about 260,000 BBL/d is a little short, which is why we we're using truck and rail transportation."
Lutz said that other hydrocarbon infrastructure challenges in North Dakota, including rig scheduling, right-of-way issues, permitting delays, competition for capital with production, and the surging production that comes from multi-pad drilling. The Hess executive cited projections from the North Dakota Industrial Commission that nearly 35,000 new wells will be drilled in the state over the next 18-20 years, which would necessitate an investment of about $35 billion in gathering systems. He presented data showing how gas processing could improve the overall returns for producers by more than 15%, but acknowledged it will be challenging to capture that value economically.
Over in Colorado, DCP Midstream LLC (NYSE:DPM) (Denver, Colorado) is making big investments to expand its gathering and processing infrastructure, Kevin Williams, the company's senior vice president for its North Business Unit, told the conference. In the coming years, DCP plans to invest $3 billion to $4 billion to build gas and NGL gathering and processing "super systems" in Colorado and other states. DCP has several midstream projects under way in Colorado, and by 2016 it expects to invest more than $1 billion building and expanding its gathering and processing infrastructure in that state. Williams said, "We're rocking and rolling in the Denver-Julesburg Basin. We're creating a super system there, and we're very excited about the future of this basin."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
