Oneok Inc. is aiming to take a final investment decision (FID) by the middle of this year on the 2.8 Bcf/d Saguaro Connector natural gas pipeline.
The U.S. Federal Energy Regulatory Commission (FERC) approved the project’s Presidential Permit in February.
Saguaro Connector would transport Permian Basin natural gas to the U.S.-Mexico border. From there, it would connect with the Sierra Madre pipeline planned by Mexico Pacific Ltd. LLC, and onto Mexico Pacific’s proposed Saguaro Energía LNG export terminal in Puerto Libertad, Sonora.
Although it has secured several high-profile offtakers, Mexico Pacific has yet to reach FID on the liquefaction terminal.
Saguaro Connector is “the most economic route” for U.S. liquefied natural gas to reach the Asia Pacific market, Oneok CEO Pierce Norton II indicated during the firm’s recent fourth quarter earnings call. “And that’s actually been indicated by the strong commercial interest and the backing by the major players there.”
Oneok’s Charles Kelley, senior vice president of commercial natural gas pipelines, said the Biden administration’s current pause on new approvals for LNG export projects to non-free trade agreement countries could have implications for Saguaro Energía’s third train, but not the first two, which have already secured the necessary authorizations.
Volume Growth Expected
Oneok operates a roughly 50,000 mile network of natural gas, natural gas liquids (NGL), refined products and crude oil pipelines, connecting U.S. supply basins such as the Williston, Powder River, Denver-Julesburg, Anadarko and Permian with various demand markets. The company processed 2.25 Bcf/d of natural gas in 2023, up 14% year/year, and expects 2024 processed volumes to range from 2.24-2.57 Bcf/d.
Oneok is targeting growth capital expenditures of $1.39-1.55 billion this year. The company expects “stable producer activity and continued production efficiency improvements, providing strong natural gas and NGL volumes across our systems,” according to Sheridan Swords, executive vice president of commercial liquids and natural gas gathering and processing.
In the gas gathering and processing segment, Swords said, “We expect volume growth in the Rocky Mountain and Midcontinent regions driven by higher-than-anticipated well connections in 2023 and consistent producer activity levels expected in 2024. In the Rocky Mountain region, we expect processing volumes to grow 9% at the midpoint compared with 2023…This outlook includes the impact from the weather we experienced so far this year, including well freeze-offs in mid-January when the wind chills dropped below negative 60 degrees.”
In the Williston, Swords said that, “Strong producer activity levels in 2023 and the continued trend of high gas-to-oil ratios drove several months of record North Dakota natural gas production with the latest record of 3.52 Bcf/d set in December. Producer activity has carried over into 2024.”
He added, “Even through the winter months, as we enter March, there are 36 rigs in the Williston Basin with 20 on our dedicated acreage. Through detailed planning sessions with our customers, we expect additional rigs to return as we move into spring.”
In the natural gas pipelines segment, “we continue to expect strong demand for natural gas storage and transportation services in 2024. At the end of 2023, more than 75% of our natural gas storage capacity was contracted under long-term agreements, and our pipeline transportation capacity was nearly 96% contracted. We expect similar levels in 2024.
“From a natural gas storage perspective, we continue to focus on expansion projects. We are currently working on a project to reactivate 3 Bcf of previously idled storage in Texas and are further expanding our injection capabilities in Oklahoma,” Swords said.
Fourth Quarter Results
Oneok reported a 17% year/year increase in natural gas volumes processed during the fourth quarter of 2023, and a 15% increase in wells connected in the Rocky Mountain region.
NGL raw feed throughput volumes rose by 20% and 17% in the Rocky Mountain and Gulf Coast/Permian regions, respectively.
The natural gas pipelines segment “significantly exceeded its 2023 financial guidance range on higher earnings from long-term storage services and higher rates from negotiated fee-based contracts,” said Swords.
For full-year 2023, natural gas processing volumes and NGL volumes rose 14% and 10%, respectively, versus 2022, Swords added. “Higher producer activity levels, increased well connects, and continued strong gas-to-oil ratios drove record fourth quarter volumes totaling nearly 400,000 b/d of NGLs and nearly 1.6 Bcf/d of processed volumes,” said Swords.
In the Midcontinent, processed gas volumes rose 15% year/year in 2023, while Permian NGL volumes rose 19%, “both benefiting from solid producer activity throughout the year in those regions,” said Swords. “Well connects across our operations increased more than 50% compared with 2022. We continue to see the benefit of those connections throughout 2024 as volumes ramp.”
In the Rockies region, “We've continued to expand our asset portfolio, increasing our extensive pipeline network to more than 50,000 miles from approximately 30,000 miles in 2013 and adding nearly 2 Bcf/d of natural gas processing capacity and three fractionators,” said Norton.
Oneok reported net income of $688 million ($1.18/share) during 4Q2023, versus profits of $485 million ($1.08) in 4Q2022. Full-year profits totaled $2.66 billion ($5.48/share) in 2023, from $1.72 billion ($3.84) in 2022.
