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ONEOK announces plans to build US$1.4bn natural gas pipeline

A US$1.4bn pipeline to transport natural gas liquids (NGL) from eastern Montana to Kansas would be in service by the end of 2019 under a proposal by Tulsa-based energy company ONEOK Inc.

The Elk Creek Pipeline, a roughly 900-mile, 20-inch line expected to be completed by the end of 2019, will offer 240,000 barrels per day (BPD) of unfractionated NGLs capacity from near the company’s Riverview terminal in eastern Montana, to Bushton, Kansas.

ONEOK said other pipelines from North Dakota are at capacity and production is increasing there.

The project is also expected to play a role in reducing natural gas flaring, a recurring problem in the booming North Dakota oil patch. 

The pipeline could be expanded to handle 400,000 barrels a day with more pump facilities, the company said in a release.

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CEO Terry Spencer said: “The existing Bakken NGL and Overland Pass Pipelines are operating at full capacity.

“Additional NGL takeaway capacity is critical to meeting the needs of producers who are increasing production and are required to meet natural gas capture targets in the Williston Basin.

"The Elk Creek Pipeline will strengthen ONEOK's position in the high-production areas of the Bakken, Powder River and Denver-Julesburg regions and also provide additional reliability and redundancy on our NGL system."

Although the new Elk Creek Pipeline won't go through Colorado, it should add capacity to take on more production coming out of North Dakota, relieving pressure on existing routes.

ONEOK said the proposed pipeline is anchored by long-term contracts with 10-15-year terms totalling about 100,000 BPD, which is supported primarily by minimum volume commitments.

The company expects the project to generate adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) multiples of four to six times.

Other projects with similar adjusted EBITDA multiples, all part of ONEOK's US$3-3.5bn capital growth plans, are in the late stages of development and "are expected to be announced when sufficient supply commitments are secured," ONEOK said.

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