February 21, 2012 / 9:25 PM / 8 years ago

UPDATE 3-Joint Venture considering new Bakken refinery

* 20,000-bpd refinery to process Bakken crude into diesel

* Calumet Specialty Products to operate plant

* Project cost estimated under $500 million

NEW YORK, Feb 21 (Reuters) - North Dakota-based MDU Resources and Calumet Specialty Products have agreed to possibly build a 20,000 barrel-per-day diesel refinery in southwestern North Dakota in a joint venture that will process crude from the Bakken shale prospect, the companies said Tuesday.

The companies agreed to explore the feasibility of building and running the refinery. They are scoping possible sites, seeking permits and procuring crude oil to process at the plant.

Diesel from the refinery will be marketed to the region’s agricultural and industrial sectors.

The pipeline will likely be located near Dickinson, North Dakota, close to the I-94 highway and a railroad that services the state, MDU Resources spokesman Rick Matteson said.

Indianapolis, Indiana-based Calumet Specialty Products will operate the plant through its refining arm, he added.

Although estimates for total project cost have not been finalized, the refinery will likely be built for under $500 million, according to Matteson.

This is the second diesel refinery in the works in North Dakota as oil production in the state’s prolific Bakken play consumes copious amounts of the fuel. North Dakota refining is undertaking a $200 million project to build a 20,000-bpd plant in the state, the first U.S. greenfield refinery in 35 years.

MDU Resources runs a 3,700-mile (5,954-km) natural gas pipeline network that transports some 860 million cubic feet (mmcf) a day, mostly in North Dakota and Montana.

Calumet Specialty Partners bought Murphy Oil Corp’s 34,300-bpd refinery in Superior, Wisconsin, over the summer. Aside from refining motor fuels, the company also processes specialty products such as lubricants, solvents and waxes used in consumer, automotive and industrial products.

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