TIOGA The company that struck oil in North Dakota back in 1951 and continues to be one of the largest oil and gas exploration and production companies in the Bakken Formation today celebrated a grand reveal of its greatly expanded Tioga Gas Plant Monday morning.
The event was held in a tent that rattled in the high winds across what would have been an uninterrupted prairie save for the massive plant roughly a quarter-mile away. That plant employs roughly 500 people composed of 400 full-time staff and 100 part-time contract workers and was described as the "Tioga ant farm" by Greg Hill, the president of worldwide exploration and production for the company, during his introductory speech because of how small the workers look on the building.
Those employees make up well over half of the 800 people who comprise Hess' total North Dakota workforce. The Bakken Formation develops the "lion's share," as senior manager of global onshore communications John C. Roper put it in a media briefing prior to the main event, of Hess' many plays in global oil production at over one-fifth of the total and nearly a third of total reserves.
Gov. Jack Dalrymple, center left, and Sen. John Hoeven, center right, jointly pull a lever that simulates powering up the greatly expanded Tioga Gas Plant at a celebratory event held in Tioga Monday morning. They are standing with Hess Corporation Chief Executive Officer John Hess, left, and Greg Hill, the president of worldwide exploration and production for the company, right.
Those 500 production employees join $1.5 billion in infrastructure investment into the play that will lead to dramatically heightened natural gas capture rates and signals a new direction in the gas versus oil narrative for a major oil company. The expansion project employed 1,400 people at peak construction at the site, adding up to a total of five million man-hours over roughly two and a half years. The final nine months alone, crews contributed 2.3 million man hours without a single recorded injury, a feat that Hill said he had never seen in his 30-some year career in exploration and production.
"It's huge," said Sen. John Hoeven, R-N.D., following the event. "It's really bigger than a $1 billion investment because you've got another half-billion in gathering systems, you've got another $300 million in a pipeline that will take the ethane to Calgary. ... It's not just about new energy and finding new and creative ways to use it, it's really about getting at our gas flaring problem in a big way. So, it's an incredible project but they're also showing great leadership for the industry."
Before the expansion of the building, which was built in its original form in 1954, Hess flared roughly 25 percent of the natural gas released in production but now flares anywhere from 15 to 20 percent. The reduction is made possible because the plant is processing about 120 million standard cubic feet of gas per day (MMSCFD), up from 100 prior to expansion, and Hess expects an increase to 250 with the addition of third-party gas with a potential for over 300.
In addition to increased production of propane, methane, butane and natural gasoline, Hess has begun processing ethane, which has not previously been produced in the state. Speakers at the event said that ethane could lead to the production of many types of plastics after being shipped in raw form to Canada. So far, said senior vice president of global onshore production Michael Turner, Hess doesn't exist in a production capacity in Canada but merely sells to them.
Flaring has become a major issue in western North Dakota, with many expressing environmental concerns and some land owners expressing frustration that so much gas is being wasted rather than sold for profit both to the company and to the mineral rights holder leasing to the company.
"This big increase in capacity is going to have an immediate benefit but it's all part of a bigger plan to require companies to have a plan for the use of the gas as they continue to drill and as they continue to develop," said Gov. Jack Dalrymple after the event. "We're not going to allow for companies, anymore, to drill for oil and gas unless they can show us exactly how they intend to handle the gas as it comes out of the ground.
When asked about statewide timelines for flaring reduction, Gov. Jack Dalrymple told The Minot Daily News that he doesn't want to talk about solid time tables in that way, instead believing that it is up to the state Flaring Task Force and the industry, itself, to develop goals.
"We need their cooperation. We need them to voluntarily work with us to achieve those goals," he said. "To say this is a must or not is really not fair because we need the buy in of everyone to achieve those kind of goals."
On the federal side, Hoeven said that some of the regulations are stifling investment that could lead to greater capture if left more alone, and even has a bill in Congress to reduce that regulation legislatively.
"The administration is putting up regulatory barriers that's preventing investment and it's that investment that will deploy the technologies and infrastructure to not only produce more energy but do it with more environmental stewardship," he said.
Hoeven pointed to marked differences between flaring outputs on the Hess side and the average flaring seen on the Fort Berthold Reservation.
"On the reservation it's almost 40 percent of the gas that's being flared whereas this company is down to 20 percent and going lower," he said. "We need gas gathering systems in order to capture that gas so it's not flared, so what we've got to find is a way to streamline that regulatory process so we can put in those gathering systems."
Both Dalrymple and Hoeven each expressed thanks during their speeches for what they see as the New York City-based Hess Corporation's continued interest in the economy and well being of North Dakota and its continued innovation within the energy industry. Hoeven cited the $1 million donation made by the corporation to the City of Minot for their recovery efforts following the 2011 flood as evidence of their commitment and investment into the communities they work in.
Hess has a 17 rig drilling program with 2014 net production expected to average 80,000 to 90,000 barrels of oil per day, according to a prepared statement given by CEO John Hess. That output is expected to rise to 150,000 barrels of oil per day by 2018, according to Hill.