The oil boom may have gone bust for now above the Bakken reservoir of North Dakota and Montana, but the rush is just starting to harvest more of the natural gas that is the byproduct of oil extraction.
Industry analysts estimate that the 2014-15 halving of oil prices could cut the number of North Dakota operating oil rigs by up to half later this year from the 2013 peak.
North Dakota officials, under criticism, last year imposed new rules designed to cut natural gas flaring at the well head from about a third to 10 percent by 2020. The burning off of natural gas has been estimated at a $1 million-to-$2 million-a-day waste of money that also pollutes.
“Most other oil fields flare less than 5 percent of the gas,” said Jim Simon, president and chief operating officer of St. Paul-based Corval Group, the industrial contractor that will grow its Bakken-related operations again this year, even as oil production ebbs. “North Dakota is not near what’s acceptable in the world. And they are going to be drilling for another 25 or 30 years.”
Corval Group, once more of a commercial contractor that barely survived the Great Recession, continues to be a good example of how Minnesota companies are profiting from the North Dakota energy bonanza while avoiding the boom’s messy downside, including a huge drop in North Dakota energy taxes.
Corval has been working since 2010 on natural-gas-capture infrastructure that has lagged the drilling boom. And it’s doubling down during the oil downturn.
If North Dakota drilling was stopped today it would still take 12 to 18 months to capture and process existing flare gas, said Dave Reif, a Corval vice president.
Oil, a notoriously volatile economic commodity, drives drilling booms and busts.
Natural gas is kind of the less-valued twin brother.
Less profitable than oil and more difficult to transport, natural gas has been the afterthought in North Dakota as oil prices rose after the Great Recession. Energy drillers burned off up to 70 percent of the gas at some remote locations and more than a fourth overall, making the Bakken fields light up at night like a sprawling city in satellite photos.
Fortunately, the collection and processing of natural gas is increasing, and it may actually help North Dakota smooth out the boom-bust cycle with a homegrown industry fueled by gas.
A growing network of pipelines and processing plants has emerged that experts say will lead to fertilizer, plastic and other plants.
“It’s the natural progression of OK, now we’re pretty fully developing on the drilling side of things, and now comes the next component,” Cullen Goenner, an economist at the University of North Dakota, told the Star Tribune last fall. “That’s where you really get the biggest bang for the buck, in terms of the employment and all those supplemental jobs. The value-added industries, more so than in just the extractive industries.”
A group called Badlands NGL announced it wants to convert cheap, abundant ethane from natural gas into polyethylene, the raw material of plastic bags, bottles and PVC pipe. And Inver Grove Heights-based CHS Inc. plans to build a $3 billion fertilizer plant 90 miles west of Fargo. And there are more plants in the works.
The North Dakota Chamber of Commerce has said the flaring in “immature fields” has given way to a capture-use-and-build mentality by industry.
This sounds better for North Dakota’s long-term economic health and the environment than flaring.
And Corval is part of the machinery that’s making that happen.
The company last year struck a partnership with GTUIT, a Montana-based technology company started several years ago to design equipment and provide natural-gas capture-and-conditioning services at the wellheads not yet served by permanent pipelines.
Corval assembles, wires, tests and commissions the mobile refineries that take about 1,000 worker hours apiece to build at its Atwater plant near St. Cloud. The company expects to produce up to 24 units this year.
“In a perfect world, there would be gas lines connected to each well pad,” Simon said. “Routed to a gas plant for processing and then to a bigger pipeline. In this market, the gas lines and compressor stations haven’t been built fast enough.
“We feel we’ve come to market with a good solution. It’s an 18-wheel trailer with gas-separation, refrigeration and compression technology engineered on that single trailer.”
And the mobile units can be moved to other remote wells as permanent gas pipeline networks are extended
Simon said the energy business in North Dakota and Montana is driving 80 percent of the recent growth of Corval.
The privately held company employed 500 and had $135 million in revenue in 2013.
In 2015, Corval expects revenue of about $250 million, nearly double that of two years ago.
It will employ more than 600 people and an additional 300 contract workers during peak construction season this summer.