Oneok plans NGL, gas system expansions

Sept. 27, 2018
Oneok Inc., Tulsa, is planning a series of capacity expansions across its US NGL fractionation, pipeline, and gas processing operations. In addition to adding a 125,000-b/d NGL fractionator (MB-5) and related systems in Mont Belvieu, Tex., the company will build the 200-MMcfd Demicks Lake II natural gas processing plant and related systems in the Williston basin, Oneok said.

Oneok Inc., Tulsa, is planning a series of capacity expansions across its US NGL fractionation, pipeline, and gas processing operations.

In addition to adding a 125,000-b/d NGL fractionator (MB-5) and related systems in Mont Belvieu, Tex., the company will build the 200-MMcfd Demicks Lake II natural gas processing plant and related systems in the Williston basin, Oneok said.

Expansion plans also include an extension of Oneok’s Arbuckle II NGL pipeline further north, additional NGL-gathering infrastructure to increase capacity between the Midcontinent market hub and Arbuckle II, and an expansion of the Arbuckle II NGL pipeline by 100,000 b/d to increase total capacity to 500,000 b/d by adding pump stations.

“Continued production growth across the basins Oneok serves requires additional NGL fractionation and natural gas processing capacity. Producers are looking for increased connectivity with the Mont Belvieu market center, and Oneok is competitively positioned to provide it,” said Terry K. Spencer, Oneok president and chief executive officer.

“Recently contracted volumes support the MB-5 fractionator project, with increasing NGL production providing an opportunity for Oneok to potentially build a future MB-6 fractionator in Mont Belvieu,” Spencer added.

Spencer said the company’s move to add more gas gathering and processing capacity in the Williston basin is critical to supporting record-setting oil and gas production in North Dakota.

With Oneok’s previously announced 200-MMcfd Demicks Lake I plant in McKenzie County, ND, now scheduled to reach capacity soon after its targeted completion in fourth-quarter 2019, the need for the Demicks Lake II plant has increased, Spencer said.

The operator previously suspended construction of the Demicks Lake I plant in 2015 in response to then-lower commodity prices, especially for gas and NGLs (OGJ Online, Feb. 24, 2015).

Oneok said it expects the newly proposed expansion projects—which will require an overall investment of about $1.46 billion—to generate adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) multiples of four to six times, with no expectations for any equity issuances in 2018 or well into 2019.

NGL fractionation, pipelines

The MB-5 fractionator and related infrastructure project—which includes system expansions for future additional fractionation, storage, and export capabilities in Mont Belvieu—will cost about $750 million. MB-5 is fully contracted and will increase Oneok’s total NGL fractionation capacity to more than 1 million b/d.

The Arbuckle II extension project will provide additional takeaway capacity needed to support volume growth in the Oklahoma STACK, and additional NGL gathering infrastructure will allow increasing volumes on the Elk Creek Pipeline access to fractionation capacity at Mont Belvieu. The project will cost about $240 million. The 100,000-b/d expansion of Arbuckle II with additional pump installations will cost about $60 million.

Arbuckle II is currently under construction, with the initial 400,000-b/d capacity scheduled to be completed in first-quarter 2020. Contracted capacity on Arbuckle II is now more than 300,000 b/d.

All of the NGL projects are due to be completed during first-quarter 2021.

Demicks Lake II plant

At a combined cost of about $410 million, the Demicks Lake II gas processing plant and related systems in McKenzie County are scheduled be completed in first-quarter 2020. The 200-MMcfd plant is supported by acreage dedications with primarily fee-based contracts.

The operator said it expects the Demicks Lake I and II plants to contribute additional NGL volumes to Oneok’s NGL gathering system and gas volumes to its half-owned Northern Border Pipeline.

Following the project’s completion, Oneok's Williston basin gas processing capacity will increase to more than 1.4 bcfd.

Contact Robert Brelsford at [email protected].