4 Min Read
(Adds details on refinery progress, stock)
By Ernest Scheyder
NEW ORLEANS, March 24 (Reuters) - MDU Resources Group Inc is looking for more natural gas producers to sign up to use a planned $650 million pipeline that would transport the fuel through North Dakota to Minnesota, the company's chief executive said on Monday.
The company in January launched a 120-day period for prospective customers of the pipeline, the largest project in the company's history, to sign supply agreements to transport natural gas.
"We're encouraged by the reaction of the marketplace, but I'd be getting ahead of myself if I said we're ready to build," Dave Goodin, MDU's chief executive, said during an interview at the Howard Weil energy conference in New Orleans. "We need some binding commitments."
Goodin declined to specify how much business the proposed pipeline has inked so far.
"Ideally, we'll be oversubscribed," he said.
Given that roughly a third of all natural gas produced in North Dakota's Bakken shale is flared, pressure has been strong from political and environmental groups to build new pipelines. Yet with the cost of natural gas near decade-lows, producers have been reluctant to spend significant amounts of money to address the issue.
The pipeline would connect with similar pipelines from TransCanada and others, letting the natural gas be transferred farther and access even more markets. All natural gas pipelines out of the Bakken are at capacity and MDU's pipeline would create more transportation options for producers.
The open season-period ends May 30 and at that time MDU will begin deciding whether to build it. Permitting alone could take two years, and construction should then take six to 12 months, Goodin said. That would mean the pipeline wouldn't be online until 2017 at the earliest.
"A little bit of the challenge here is for the market to look that far in advance," Goodin said.
The company is building, along with Calumet Specialty Products Partners LP, the first U.S. refinery to be built since 1976 and hopes to have it online by December.
The project, which recently jumped in cost to $350 million from $300 million, is designed to supply locally produced diesel for North Dakota's fracking rigs, trucks and trains key to further development of the Bakken shale, a geological formation two miles under the state that holds a 50 year supply of oil, according to most estimates.
Despite being the second-largest oil producing state in the nation, North Dakota imports more than half of the roughly 53,000 barrels of diesel consumed each day. Only 22,000 barrels are produced in state daily, at Tesoro Corp small Mandan plant near the state capital.
Even with the strong demand, MDU is focused on finishing this refinery and has no current plans to build a second one, Goodin said.
"We're not going to flood the market," he said. "Even though yes, there is definitely demand for more diesel."
Shares of MDU fell 0.7 percent to $33.52 in Monday afternoon trading. The stock has gained about 38 percent in the past 52 weeks. (Reporting by Ernest Scheyder; Editing by Bernard Orr and Tom Brown)