Urea brownfield at Dakota Gas: new schedule for start-up, construction at 99%

THIS UPDATE IS ONLY AVAILABLE TO SITE MEMBERS

The urea brownfield in Beulah, North Dakota, has been under construction since mid-2014. It didn’t start-up in early 2017, as originally scheduled, but it is now, finally, more-or-less finished, and its owners have announced a new schedule for the start of production.

Construction is nearly 99 percent complete and the project is on schedule for commercial operation by the end of January 2018 … several contractors are either already offsite, or in the process of demobilizing …

“Most of the process systems have been turned over from construction staff to commissioning staff.”
Basin Electric news brief: Urea facility project on track, 11/21/2018

In updates to my Research Note for Beulah, ND, I’ve reported previously on the 2016 storm damage, which flattened the urea storage building, forcing the construction team to rip out and relay the concrete foundations. I’ve also commented on the project’s 80% budget increase, from the original $402 million in 2014, to $500 million in 2015, and up to its current total of $740 million in 2017.

To celebrate the new year, the company provided some color on what was going on:

The urea production facility at the Synfuels Plant has had financial challenges for some of the membership. The budget increased over the course of construction due to increases in quantity of materials and costs of labor required to build the facility. The project was further challenged by the quality and timeliness of engineering, and ultimately, staff released the general contractor for sustained poor performance. Once those issues were resolved, the project has consistently met its targets and is set to go into production by the end of January 2018.
Basin Electric news brief: Value of an asset: Why Basin Electric will continue to operate Dakota Gasification Company, 12/31/2017

These problems appear now to be behind the company and, last week, local news reported on the imminent start of urea production:

The project has been three years in the making, employing more than 1,000 contractors at the peak of construction. Just over 200 contractors were on site in mid-December doing finishing work.

[Plant manager Dale Johnson] said workers have been commissioning various parts of the plant — pumps, motors, compressors — running each piece independently doing pressure checks and ensuring integrity. He said they have also completed a “water run,” making sure there are no leaks in the system.

The plant will be ramped up to full production pretty quickly, said Johnson, adding the plant will process 1,100 tons of urea pellets daily …

Half of the anhydrous produced by the plant will be turned into urea.

“It’s a good fit for our membership,” Johnson said.

The cooperative is finalizing its marketing plans but its product will likely be used on farms within a 250- to 300-mile radius, including Minnesota, South Dakota and Montana, a state where use of urea is especially common.
Bismarck Tribune: State’s first urea plant beginning operations, 01/01/2018

With the start-up of the urea production line, the fertilizers segment will represent a majority (51%) of the synfuels plant’s total projected revenues.

The broader business case for the synfuels plant, and the role of fertilizers in its future, has evidently been an advocacy project for Dakota Gas’s parent company. Basin Electric Power Cooperative found itself, in November 2017, in the position of explaining to its members the reasons why this asset was beneficial, despite expecting it to lose money every year for the next ten years:

The nature of the business surrounding Dakota Gasification Company’s Great Plains Synfuels Plant is based on commodity prices. The price of oil and natural gas, the prices that crops are selling for, the price of fertilizer and, though less so, the price of other products like carbon dioxide.

When commodity prices were higher, profits meant Basin Electric was able to return a lot of money to its members. The Great Plains Synfuels Plant has served as a $1.4 billion benefit to its members since 1988, and continues to provide benefits.

However, the most recent 10-year financial forecast shows losses every year.

Basin Electric directors and senior staff have decided the cooperative needs to hang steady with Dakota Gasification Company while maintaining its focus on strategic cost management and continuing to look at other options.
Basin Electric Power Cooperative news brief: Value of an asset: Why Basin Electric will continue to operate Dakota Gasification Company, 12/31/2017

For more information, see my Research Note for Beulah, ND.