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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Crude-oil pipelines have significantly increased their share of the crude-oil outbound transportation market in the Williston Basin, reversing several years where pipelines lost market share to railroads. The market share fight has become more intense in recent months, as both pipelines and railroads complete previously announced projects and plan new ones.
Despite today's crude oil prices, the Williston Basin, mainly located in North Dakota, still is producing more than 1 million barrels of crude oil per day--about 15% of U.S. domestic production, according to the North Dakota Industrial Commission (Bismarck, North Dakota). Surging crude-oil production has triggered billions of dollars of capital spending for crude-oil pipelines, railroad facilities and storage Terminals in recent years.
Click on the images at right to see crude-oil production's growth in North Dakota and the average per-barrel price realized by producers in that state for their crude oil.
The surge in North Dakota's crude-oil production outstripped the outbound capacity of pipelines, creating an opening for railroads to capture a growing share of that transportation market in the 2010-13 period. Back when North Dakota Production companies were receiving $80 or more per barrel for their product, they were willing to pay railroads a higher per-barrel transportation cost in return for the flexibility to transport their product to markets virtually anywhere in the U.S. "Optionality" was the name of the game for shippers. For more on that, see May 7, 2013, article - Crude-by-Rail Surges, Dominating Outbound Transportation from Williston Basin.
Click on the image at right to see the crude vs. rails market share battle for outbound transportation of crude oil from North Dakota.
Optionality is still the name of the game, but the rules have changed. As crude-by-rail's outbound transportation market share surged in 2012 and 2013, pipeline companies began planning investments to recapture their lost market share. For more on that, see October 14, 2014, article - Crude-Oil Pipelines May Gain Market Share from Rails in Williston Basin.
Now, the completion of some of those projects, coupled with crude oil's lower prices, have helped pipelines to more than double their market share, when compared with that's industry's market share bottom in April 2013.
Some of these recently completed crude-oil pipeline projects include:
These pipeline projects have sharply boosted North Dakota's outbound crude-oil takeaway capacity in recent years. Pipeline capacity is scheduled to nearly double over the next two years, from 739,000 BBL/d this year to an estimated 1.4 million BBL/d in 2017, according to the North Dakota Pipeline Authority (Bismarck, North Dakota).
Click on the image at right to see historical and projected outbound transportation capacity for pipelines and railroads.
Companies seeking to transport Williston Basin crude oil by rail also have been active in recent years, adding or expanding several large rail terminals, including:
Dakota Plains Holdings Incorporated (Wayzata, Minnesota) is nearing completion of a 90,000-BBL unit expansion of its New Town Crude-by-Rail Transloading Terminal. Completion of that project, scheduled for later this year, will increase that facility's storage capacity to 270,000 BBL. Enbridge is planning to add up to 1.5 million BBL of storage capacity at its Berthold Crude Oil Terminal in Berthold, North Dakota. Construction of that addition is scheduled to begin later this year and be completed by next April.
Most of the oil not transported out of North Dakota by rail or pipeline is processed by the state's refineries. For years, Tesoro's Mandan refinery was the only one operating in that state. In 2012, that refinery expanded its capacity by 10,000 BBL/d, to 68,000 BBL/d. A new refinery located near Dickinson, North Dakota, began operating in May. That $400 million topping refinery can process up to 20,000 BBL/d, according to MDU Resources Group Incorporated (NYSE:MDU) (Bismarck, North Dakota), the refinery's owner. Most of that refinery's product will be diesel that will be consumed in-state by North Dakota's agriculture, transportation and oil & gas industries.
Another refinery, Thunder Butte, is proposed to be built in North Dakota. That $150 million project began construction in mid-2013, and is scheduled to begin operating in 2016. For more on the growth plans of North Dakota's refiners, see September 26, 2013, article - Grassroot Refinery Build-out Under Way in North Dakota.
"The outbound logistic business is particularly dynamic in the Williston Basin because, unlike more developed areas like the Permian Basin, a lot of the Williston's transportation infrastructure had to be created," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "A decade ago, the Williston Basin has virtually no crude oil production, so there were no pipelines and scant railroad infrastructure. Over the next few years, we expect pipelines to continue winning back market share from railroads. This will be a highly dynamic transportation market for the next few years."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Despite today's crude oil prices, the Williston Basin, mainly located in North Dakota, still is producing more than 1 million barrels of crude oil per day--about 15% of U.S. domestic production, according to the North Dakota Industrial Commission (Bismarck, North Dakota). Surging crude-oil production has triggered billions of dollars of capital spending for crude-oil pipelines, railroad facilities and storage Terminals in recent years.
Click on the images at right to see crude-oil production's growth in North Dakota and the average per-barrel price realized by producers in that state for their crude oil.The surge in North Dakota's crude-oil production outstripped the outbound capacity of pipelines, creating an opening for railroads to capture a growing share of that transportation market in the 2010-13 period. Back when North Dakota Production companies were receiving $80 or more per barrel for their product, they were willing to pay railroads a higher per-barrel transportation cost in return for the flexibility to transport their product to markets virtually anywhere in the U.S. "Optionality" was the name of the game for shippers. For more on that, see May 7, 2013, article - Crude-by-Rail Surges, Dominating Outbound Transportation from Williston Basin.
Click on the image at right to see the crude vs. rails market share battle for outbound transportation of crude oil from North Dakota.Optionality is still the name of the game, but the rules have changed. As crude-by-rail's outbound transportation market share surged in 2012 and 2013, pipeline companies began planning investments to recapture their lost market share. For more on that, see October 14, 2014, article - Crude-Oil Pipelines May Gain Market Share from Rails in Williston Basin.
Now, the completion of some of those projects, coupled with crude oil's lower prices, have helped pipelines to more than double their market share, when compared with that's industry's market share bottom in April 2013.
Some of these recently completed crude-oil pipeline projects include:
- Kinder Morgan Incorporated (NYSE:KMD) (Houston, Texas) finished building the Double-H crude-oil pipeline earlier this year. This $300 million, 460-mile project will take up to 50,000 BBL/d of crude from Dore, North Dakota, to Guernsey, Wyoming, where it will connect with the Pony Express Pipeline, owned by Tallgrass Energy Partners LP (NYSE:TEP) (Leawood, Kansas).
- The Butte Pipe Line, owned by True Companies (Casper, Wyoming), late last year completed construction of a loop that added another 100,000 BBL/d of outbound transport capacity from the Williston Basin.
- Enbridge's Bakken Expansion Program, completed in early 2013, added 120,000 BBL/d of outbound transportation capacity. At the time of that expansion's completion, Enbridge Incorporated (NYSE:ENB) (Calgary, Alberta) said an additional expansion, to 325,000 BBL/d, was possible if market conditions were favorable.
- Dakota Access Pipeline, a 30-inch-diameter pipeline that is scheduled to run about 1,100 miles from Western North Dakota to Patoka, Illinois. The project is designed to transport up to 450,000 BBL/d, with a potential to expand it to 570,000 BBL/d. Developed by Energy Transfer Partners, the $1.3 billion project is scheduled to kick off construction this October and to be operating by late 2016.
- Enbridge's Sandpiper grassroot pipeline, scheduled to transport up to 225,000 BBL/d out of the Williston Basin, has been delayed a year due to regulatory delays. The $2.6 billion, 618-mile project is now expected to begin construction next summer and to be brought online in early 2017.
These pipeline projects have sharply boosted North Dakota's outbound crude-oil takeaway capacity in recent years. Pipeline capacity is scheduled to nearly double over the next two years, from 739,000 BBL/d this year to an estimated 1.4 million BBL/d in 2017, according to the North Dakota Pipeline Authority (Bismarck, North Dakota).
Click on the image at right to see historical and projected outbound transportation capacity for pipelines and railroads.Companies seeking to transport Williston Basin crude oil by rail also have been active in recent years, adding or expanding several large rail terminals, including:
- Crestwood's COLT facility in Epping, North Dakota, which can handle about 120,000 BBL/d. That project was brought online in 2012 and was expanded to 140,000 BBL/d in 2014.
- Hess' Tioga Rail Terminal in Tioga, North Dakota, which also was brought online in 2012, can handle up to 70,000 BBL/d.
- The Bakken Oil Express Terminal in Dickinson, North Dakota, was brought online in 2011 and was expanded in 2013. That terminal can now handle up to 200,000 BBL/d.
- Enserco's Gascoyne, North Dakota, terminal was brought online in 2013. That terminal can transport up to 65,000 BBL/d.
- Dakota Gold's terminal in Plaza, North Dakota, scheduled to open later this year, will be able to transport up to 70,000 BBL/d.
- Northstar's transloading facility in Fairview, Montana, was brought online last year with 20,000 BBL/d of capacity, but it is expanding that to 180,000 BBL. That expansion is scheduled to be completed this year.
Dakota Plains Holdings Incorporated (Wayzata, Minnesota) is nearing completion of a 90,000-BBL unit expansion of its New Town Crude-by-Rail Transloading Terminal. Completion of that project, scheduled for later this year, will increase that facility's storage capacity to 270,000 BBL. Enbridge is planning to add up to 1.5 million BBL of storage capacity at its Berthold Crude Oil Terminal in Berthold, North Dakota. Construction of that addition is scheduled to begin later this year and be completed by next April.
Most of the oil not transported out of North Dakota by rail or pipeline is processed by the state's refineries. For years, Tesoro's Mandan refinery was the only one operating in that state. In 2012, that refinery expanded its capacity by 10,000 BBL/d, to 68,000 BBL/d. A new refinery located near Dickinson, North Dakota, began operating in May. That $400 million topping refinery can process up to 20,000 BBL/d, according to MDU Resources Group Incorporated (NYSE:MDU) (Bismarck, North Dakota), the refinery's owner. Most of that refinery's product will be diesel that will be consumed in-state by North Dakota's agriculture, transportation and oil & gas industries.
Another refinery, Thunder Butte, is proposed to be built in North Dakota. That $150 million project began construction in mid-2013, and is scheduled to begin operating in 2016. For more on the growth plans of North Dakota's refiners, see September 26, 2013, article - Grassroot Refinery Build-out Under Way in North Dakota.
"The outbound logistic business is particularly dynamic in the Williston Basin because, unlike more developed areas like the Permian Basin, a lot of the Williston's transportation infrastructure had to be created," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "A decade ago, the Williston Basin has virtually no crude oil production, so there were no pipelines and scant railroad infrastructure. Over the next few years, we expect pipelines to continue winning back market share from railroads. This will be a highly dynamic transportation market for the next few years."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
