North Dakota refinery begins operations: Update

OREANDA-NEWS. The first new US refinery in nearly 40 years has begun ramping up operations and plans to sell diesel fuel this month.

MDU Resources' and Calumet Specialty Products Partners' 20,000 b/d joint refinery in Dickinson, North Dakota, will ultimately produce 7,000 b/d of diesel for the North Dakota market.

The Dakota Prairie refinery will also produce 6,500 b/d of naphtha, a diluent and gasoline blendstock, and 6,000 b/d of tower bottoms used as base oil feedstock.

Planners conceived Dakota Prairie as booming Bakken drilling activity starved for diesel fuel. Tesoro in 2012 added 10,000 b/d of capacity to its now 68,000 b/d refinery in Mandan, North Dakota, to serve similar demand.

Oil field activity plunged with crude oil prices since June — active rigs in North Dakota have fallen by half since the refinery began construction, with almost all of the drop occurring over the past year, according to Baker Hughes.

Overall state diesel demand may fall, MDU resources said today. But North Dakota remains short diesel fuel and has agricultural and transportation demand beyond oil field services, the company said. MDU Resources earlier this year said it was considering a second, similarly-sized new refinery project.

Dakota Prairie will take Bakken crude by pipeline. The refinery sell diesel to multiple local wholesale distributors. All of the naphtha production will currently go by rail to Canada as diluent, while refinery partner Calument takes the refinery bottoms for lubricants production.

The last greenfield US refinery with significant crude capacity began operating in 1977, according to the Energy Information Administration (EIA). But the industry has expanded capacity dramatically without need for greenfield construction.

Marathon Petroleum has since expanded what began as a 200,000 b/d plant in Garyville, Louisiana, to 562,000 b/d. Saudi Aramco and Shell joint venture Motiva began operations in 2012 on a 375,000 b/d expansion at its Port Arthur, Texas refinery, a expansion that alone added nearly 20 times more capacity than the Dakota joint venture facility.