US ONEOK halts work on three natgas processing plants

HOUSTON (ICIS)–ONEOK is halting work on three natural-gas processing plants because of lower pricing, a decline in drilling, and its expected effect on growth in natural-gas production, the US-based midstream company said on Monday.

ONEOK had planned to start operations at the three plants in 2016. The company will resume work once market conditions improve, it said.

Processing plants remove natural-gas liquids (NGLs) such as ethane, propane and butane, so the resulting gas can be burned as fuel. US petrochemical producers rely heavily on NGLs as feedstock for crackers.

ONEOK’s Demicks Lake plant would be built in North Dakota’s Williston Basin in the Bakken formation. Its capacity would be 200 million cubic feet/day (200mcf/day), and operations had been planned to start in the third quarter of 2016.

The Knox plant would be in the South Central Oklahoma Oil Province (SCOOP). Its capacity would be 200mcf/day, and operations had been planned to start in the fourth quarter of 2016.

The Bronco plant would be in Wyoming’s Powder River Basin. Its capacity would be 100mcf/day, and operations had been planned to start in the third quarter of 2016.

ONEOK did not provide more details behind its decision to halt the projects.

While ONEOK has plants in other production areas, the company has been aggressive in expanding in North Dakota, where it is processing associated gas produced from the state’s numerous shale-oil wells.

These wells rely on hydraulic fracturing, which drives up their production costs when compared with conventional wells.

Moreover, oil producers in North Dakota are more reliant on rail to ship out crude, further raising their costs.

This made oil production in North Dakota vulnerable to the sharp drop in oil prices.

West Texas Intermediate (WTI) has fallen from the low $100s/bbl in July to less than $50/bbl.

That is close to the limit at which Williston producers can maintain operations, according to a ONEOK investor presentation held in early December.

ONEOK said North Dakota’s Williston can withstand oil prices of $45-60/bbl. Its customers were skewed towards $45/bbl.

So far, oil production has continued to increase, although US rig counts have continued to decline.

The following lists some of ONEOK’s plants and projects in North Dakota.