The abundance of crude oil in North Dakota’s Bakken shale play has prompted the creation of something that the US refining industry has not seen for almost 40 years: a new oil refinery.
The Dakota Prairie Refinery Dickinson, jointly owned and operated by MDU Resources Group and Calumet Specialty Products Partners, commenced operations in early May. The refinery uses locally sourced Bakken crude and is capable of processing 20,000 barrels per day (bpd), producing 7,000 bpd of diesel fuel for North Dakota-based and regional customers. The $430 million, 318-acre plant is located a few miles west of Dickinson.
The facility will also produce up to 6,500 bpd of naphtha, which is used to dilute heavy oil transported by pipeline or as a feedstock for gasoline production. In addition, the refinery can collect roughly 6,500 bpd of crude distillate, which can be used as a feedstock for lubricating oils and other refined products.
The opening of the refinery runs counter to the historical trend. Some 16 refineries have closed in North America and Europe during the last few years, including HOVENSA’s refinery in the US Virgin Islands, Western Refining’s East Coast refinery, and Sunoco’s Trainer, Pennsylvania, refinery.
Industry consolidation, a challenging regulatory and economic environment, and the growth of lower-cost overseas refineries have caused the number of refineries in the US to fall from more than 300 in 1980 to less than half that number today.
So what is going on in North Dakota?
Well, the state has abundant local oil and gas production, and a local population (and infrastructure) that has thrived on the fresh sources of revenues that the oil boom has bought, and it sees a market opening for local diesel supply (more than two-thirds of North Dakota’s diesel fuel is currently imported from other states).
Other states have long struggled with the challenge of getting the support of local and state officials and agencies to build new refineries in the face of tough EPA regulations and opposition from environmentalists and residents in neighboring communities of potential refinery sites. By contrast, lightly populated and lightly industrialized North Dakota has not had that problem. (The only other refinery producing fuel in North Dakota is the Tesoro plant at Mandan.)
The pro-oil, pro-economic development climate that has been created in North Dakota during the last decade, and the commitment of the joint venture partners to invest and build, means that the prize for building the first new refinery in the US since 1976 goes to North Dakota.
Where will the next refinery be?
British editorial veteran Stuart Hampton has been covering oil and gas companies for Hoover’s since the Neogene-Quaternary period. Well, actually, since the early 1990s. For the best overview of the oil industry and its history he recommends Daniel Yergin’s “The Prize.” You can also follow Stuart on Twitter.
Photo courtesy of MDU Resources Group.