Hess Midstream Partners LP (NYSE: HESM) said Jan. 25 it formed a 50/50 joint venture with Targa Resources Corp. (NYSE: TRGP) to build a new gas processing plant in North Dakota within the core of the Bakken.
As part of the JV agreement, the companies will construct a new 200 million standard cubic feet per day (MMscf/d) gas processing plant called Little Missouri Four (LM4). The new gas plant will be located at Targa’s existing Little Missouri facility, south of the Missouri River in McKenzie County, N.D., and is expected to be completed in fourth-quarter 2018, according to Hess Midstream's press release.
Doug Burgum, Gov. of North Dakota, said in a statement: “We are thrilled to welcome Hess’ significant investment, which underscores the company’s longstanding presence in North Dakota and commitment to our state. This processing plant will provide much-needed capacity at a time when North Dakota’s oil production nears record levels and associated natural gas production continues to climb. It’s a huge step in the right direction toward continuing to meet our flaring reduction goals and encouraging responsible energy development and infrastructure investment.”
Targa will manage the construction of LM4 and will operate the plant. Construction costs for the new gas plant are anticipated to be about $150 million gross to the JV.
Hess Midstream said it will handle $15 million of the construction costs and $60 million will be funded by Hess Infrastructure Partners LP (HIP). In addition, Hess Midstream and HIP will also invest roughly $100 million gross, $20 million attributable to Hess Midstream, for new pipeline infrastructure to gather volumes to the LM4 plant.
With these investments, Hess Midstream will have total processing capacity of 350 MMscf/d of gas in the Bakken, with export optionality north and south of the Missouri river. The company said it will retain the option to further expand processing capacity by de-bottlenecking the Tioga Gas Plant in the future. As a result, the previously planned turnaround at the Tioga Gas Plant in 2019 is expected to be deferred, according to the release.
John Gatling, Hess Midstream’s COO, said the additional Bakken processing capacity will provide another layer of organic growth to meet the company’s long-term targeted annual distribution per unit growth.
“By executing infrastructure projects that provide more optionality to producers, Hess Midstream expects to continue to capture additional Hess and third-party volumes, reinforcing the competitive advantage we enjoy from our strategically located infrastructure in the core of the Bakken," Gatling said in a statement.
Hess Midstream’s 50% interest in the new Targa JV will be held through Hess TGP Operations LP, in which Hess Midstream owns a 20% controlling economic interest, and HIP owns the remaining 80% economic interest.
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