US Williston can withstand $45-60/bbl oil, ONEOK sees NGLs flowing

HOUSTON (ICIS)–The Williston basin − a major shale-oil play in North Dakota − can withstand oil prices as low as $45/bbl, allowing production of crude and natural gas liquids (NGLs) to continue, an executive at ONEOK said on Wednesday.

West Texas Intermediate (WTI) has fallen sharply to $67/bbl from a June high of $107/bbl. The sudden drop raised concerns about the viability of unconventional crude production, which predominates in North Dakota.

ONEOK’s customers, though, can withstand prices of $45-60/bbl, with the range skewed towards $45/bbl, said Mike Fitzgibbons, vice president, commercial, natural gas gathering and processing business. Fitzgibbons made his comments during an investor presentation.

“We feel really good that drilling is going to continue there,” Fitzgibbons said. “We see no indications of changes in drilling plans.”

Three weeks ago, some producers told ONEOK that they planned to add rigs in 2015, according to Fitzgibbons.

The Bakken is the highest growth region for ONEOK, which extracts the NGLs from the associated gas produced by the oil wells.

ONEOK is connecting about 1,200 wells/year, which is about 50% of the wells being drilled in the Bakken, Fitzgibbons said.

While the Bakken relies on unconventional drilling technology, advances have lowered production costs.

With pad drilling, companies can drill several wells from one rig, allowing it to stay in the same place for six to eight months, Fitzgibbons said. As a result, volumes should increase even if the number of rigs decline slightly.

Continued crude production is not the only factor benefiting ONEOK’s operations in North Dakota.

Many of the state’s oil wells are not connected to gas pipelines. As a result, the wells flare the gas because it cannot ship it through pipelines.

The state’s flare rate reached a high of 36% in September 2011.

The North Dakota Industrial Commission (NDIC) in July instituted requirements for producers to reduce flaring to 26% by Wednesday, to 23% by the first quarter of 2015, to 15% by the first quarter of 2016 and to 5-10% by the fourth quarter of 2020.

The regulations should encourage oil producers to capture their associated gas and have ONEOK process it.

ONEOK has numerous processing plants in North Dakota that are either already operating or that will start operations in the next 24 months.

These plants will supply the ethane and propane for crackers. NOVA Chemicals is already cracking Bakken ethane at its complex in Alberta.

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

Additional reporting by Jessie Waldheim