ARB Midstream expects Rockies condensate rise

OREANDA-NEWS. November 02, 2015. Lease condensate production from the Rocky Mountain region is expected to grow by 84,000 b/d in the next five years, from 266,000 b/d to 350,000 b/d, said Adam Bedard, chief executive of ARB Midstream.

The vast majority of the growth — 95pc will be in the Denver Julesburg (DJ) basin, he said at the Argus Condensate & Naphta Markets conference in Houston.

The condensate production can be blended into pipelines but some lines have specs that limit the percent of light ends, he said. In addition, rail transport can access the Canadian diluent market or Gulf coast markets and provide uplift to distressed light barrels.

Major Rockies basins — including the DJ, the Powder River Basin and the Bakken — have seen sharp drops in rig counts because of depressed commodity prices, which have been partially offset by drilling efficiencies and better IP rates.

In the Bakken, the production of 62 rigs now is equivalent to the output of 81 rigs a year earlier, Bedard said. In the DJ, the production of 24 rigs now is equal to that of 37 rigs a year earlier.

Bedard predicted that total Bakken crude production should drop by 180,000 b/d by mid-2016 and rebound in early 2018. North Dakota's August crude output averaged 1.19mn b/d, down by 1.7pc from the previous month, according to the latest state data.

The rate and volume of recovery of Bakken production will depend on how quickly producers bring idle rigs back online.

North Dakota recently decided to allow producers to let uncompleted wells sit idle for an extra year in "temporarily abandoned" status in an effort to help companies deal with depressed crude prices, now at the lowest levels in six and a half years. The provision was already allowed under state regulations, but the state's Industrial Commission approval earlier this month re-affirmed that the state would move forward with the plan.

At the end of August, an estimated 993 wells were waiting on completion services, 79 more than at the end of July.

ARB, based in Denver, Colorado, is in its first year of operations. The company is developing a 70,000 b/d rail loading terminal in Weld county, Colorado, to serve growing crude production in the DJ basin. ARB is also planning a rail facility near Big Spring, Texas, to be served by Union Pacific railroad to provide an outlet for crude from the Permian basin.

The company said last month that it acquired crude marketing and trading company Sunwest Canada, in an effort to increase its reach into Canada.