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Steel Reef already expanding North Portal gas plant

Second plant planned for Alameda area

North Portal, Calgary– Provincial regulations meant to substantially increase conservation of associated natural gas and reduce flaring came into full effect on July 1. The Directive S-10 has been a driving factor in the construction or expansion of several gas plants in southeast Saskatchewan. One of those is the new Steel Reef Infrastructure Corp. North Portal gas plant.

Just a few kilometres northwest of North Portal, the plant is situated within sight of the U.S. border.

Two companies have been active in developing that area – Elkhorn Resources in the Northgate area, and Legacy Oil + Gas in the North Portal area. Coincidentally, both have been acquired by larger firms since the inception of this new gas plant. Elkhorn was purchased by Vermillion Energy and Legacy by Crescent Point. Both of which continue to utilize the North Portal Gas Plant for gas processing. 

“That’s a midstreamer’s life, said Austin Voss, vice-president and chief operating officer of Steel Reef. “We don’t enter into these things lightly.”

The plant is located at 1-9-1-4-W2, across the road from a former Legacy, now Crescent Point battery.

Construction on the facility began June 2014. It became operational February 2015, according to Voss.

The project includes the initial plant itself, the eight kilometre sales pipeline and 35 kilometres of gas gathering infrastructure.

One of Saskatchewan’s capital management firms, PFM Capital, has made its largest placements to date with Steel Reef, and one if its partners, Rob Duguid, sits on the Steel Reef board.

Steel Reef has had three rounds of investment. The first, in March 2013, raised $66 million. The next, in March 2014, raised $65 million. The third, this past April, raised $35 million, for a total of $166 million. All that investment has been private money, a mix of retail and institutional investors.

Asked why North Portal was chosen, he responded that area producers had done a lot of the front-end work already and had been working on the project since 2012. “We didn’t pick the location,” he said.

Being adjacent to an existing oil battery, having a good landowner, good road access and good relationships with the rural municipality were all considerations.

There were no existing gas plants in the area, but there were “tons of drilling locations.”

The full implementation of the Directive S-10 on gas conservation as of July 1, 2015 was another factor.

The first phase of the North Portal Gas Plant was 12 million standard cubic feet per day. They are already doubling that to 24.5 million standard cubic feet per day.

Legacy, which had been drilling along the border for the past several years, built an eight-inch pipeline connecting to the gas plant.

Construction of the plant peaked at over 100 people at times, with 50 to 70 workers being the average for much of the work.

In operation, four to five operators run the plant. That number may be bumped up to six or seven long-term.

Currently Vermillion contract-operates the facility.


Are the S-10 gas conservation regulations behind this plant?

“That’s absolutely why,” Voss said, but added that “It is economic for the producers to recover the gas and the liquids.

“It was certainly the impetus.”

There are lots of far-reaching implications, he noted. One is Saskatchewan, which has become a net gas importer in recent years, can use more of its own-source natural gas.

“That being said, it’s hard,” Voss said, pointing out there is limited infrastructure for gas handling in the province.

For larger producers, that’s not as much of an issue as it is for smaller ones. They need help, he said.

One of the important factors is the collection of natural gas liquids, the value of which cannot be understated in times of low natural gas prices.

“When things come around, there’s lots of value in the liquids,” Voss said.

The gas coming into the plant produces about 80 barrels of NGLs per million standard cubic feet. That can mean up to 2,000 barrel per day production once the expansion is complete.

“This is pretty liquids-rich,” he said.

Those NGLs, principally propane, butane and condensate, are separated from the natural gas into a single phase. The plant does not have fractionation facilities right now, but that could be something for the future.

While this plant has not yet shipped NGLs via the nearby Ceres Northgate Logistics Hub, which is on the BNSF railway into the United States, that could be a possibility in the future. “We have discussions with them fairly regularly,” Voss said. “We don’t own the production ourselves.” 

Every bit of gas coming into the plant is solution gas, produced as a by-product of oil extraction.

Alameda plant in the works

On the heels of building the second phase of the North Portal plant, a second gas plant is also in the works. The proposed facility would be a few kilometres northwest of Alameda, placing it between the existing, long-established Steelman and Nottingham gas plants.

“We’re at the point where we’re finishing scoping. We’re picking the location,” he said.

The second plant would be slightly smaller than the first phase of the North Portal plant. It will be sized for committed volumes. “We don’t build on spec,” Voss said, adding that expansion is always in their minds.

Planning is underway for an open house soon.

Voss said they are hoping to have the proposed Alameda plant in operation before the end of the summer of 2016.

H2S injection

One of the properties of the gas the North Portal facility will handle is a higher H2S content. The sour gas content is beyond reasonable volumes for flaring or incineration. “It’s just too much.”

As a result Steel Reef has pursued a different strategy, a first for Saskatchewan in the oil and gas industry. They will be injecting H2S into a deep saline aquifer, very similar to the Aquistore project. The target formation is the Deadwood, right above the PreCambrian basement. The well, recently drilled and in the process of completion as of early July, is the third-deepest in Saskatchewan after the Aquistore observation and injection wells. Steel Reef’s injection well is 3250 metres deep

“It will be the first in Saskatchewan for oil and gas,” Voss said.

The proposed Alameda plant will have much less H2S, and therefore it can use flaring or incineration to deal with it.

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