Background

As noted in our previous post Proposed gas quality constraints on the Northern Border pipeline will bring more ethane from North Dakota to Gulf Coast markets, ethane recovery from Bakken shale natural gas will need to expand to meet proposed gas gross heating value limits on the Northern Border pipeline. Moreover, natural gas production in the region will continue to grow as producers work to meet flaring reduction requirements, so there is a large and growing need for new outlets for ethane. This is also an issue in the US Northeast, where the volume of unrecovered ethane in Marcellus/Utica gas also threatens to exceed pipeline specifications.

There is sufficient infrastructure to move ethane to US Gulf Coast crackers and exports, however current and projected ethane demand from these sources is not large enough to make a call for Bakken ethane. The marginal barrel is satisfied by regions closer to the US Gulf Coast, and as a result Gulf Coast ethane prices remain too low to incentivize Bakken producers to send the ethane there, generating a need for alternative markets closer to the point of production.

Power generation—an alternative market for ethane

The abundance of ethane (about 170,000 b/d still being rejected) in North Dakota has triggered interest in alternative uses of ethane. Similar to North Dakota, the US Northeast region rejects a substantial amount of ethane. The abundance of ethane in the region led Competitive Power Ventures (a company focused on electric power generation development and management) to develop a power plant partly based on ethane as a fuel source. In March 2020, Competitive Power Ventures completed its CPV Fairview natural gas--fired, combined-cycle plant (1,050 MW at full load) in Pennsylvania, which can switch to burn high contents of ethane blended into natural gas. Using GE's DLN2.6+ Axial Fuel Staging (AFS) combustion system, Competitive Power Ventures reported, CPV Fairview can use 25% ethane mixed with natural gas for enhanced plant economics, such as when natural gas prices increase. Competitive Power Ventures intends to capitalize on the times when ethane is at a discount to natural gas.

In North Dakota, Bakken Midstream Natural Gas LLC recently signed an agreement to supply ethane to Williston Basin Energy Center for a new power generation project entirely based on ethane as fuel. In a news release, the company said that the project will be the largest power plant to utilize advances in combustion turbine technology that enables ethane as its primary fuel source. Although the specifics of the power plant are not known at this point, the proposed project is slated to begin construction in 2022. Based on our estimates, a 500 MW generation capacity that uses 100% ethane would consume about 25,000 b/d mb/d of ethane.

The proposed power plant project in North Dakota is a first step in finding alternative markets for ethane within the region. If successful, the project could spur further interest and scale-up. Ethane- based power plants could be a solution to reduce ethane rejection and adhere to the proposed pipeline specifications.

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Published 18 March 2021 by Manmohan Pozhickal, Principal Research Analyst, IHS Markit and Veeral Mehta, Director, Natural Gas Liquids Research and Consulting, IHS Markit

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.