Energy Play Highlight: Bakken's Crude-by-Rail, Pipeline Takeaway Greatly Exceeds Current Production

---

Researched by Industrial Info Resources (Sugar Land, Texas)--The Bakken Shale's tight oil reserves have been a hot topic for years, as regional labor shortages, labor surpluses, market access limitations and safety concerns each have had their moment in the spotlight. Multiple midstream companies have sought to capitalize on the booming production in the area, planning pipelines to carry the new source of crude to producers. Being the cheapest form of transportation for liquids over long distances, it would make sense for any pipeline proposed to meet with immediate success.

However, after multiple cancellations and postponements, it has become clear that there is something that is keeping pipelines from being successful. With high competition in the Midwest and Gulf Coast refining markets, and with production on a very slow decline, the Bakken has a surplus of takeaway capacity in just its dominant crude-by-rail infrastructure. In such an environment, there may be less demand for a pipeline than expected.

Currently, there are only three in-service pipelines that carry Bakken crude oil outside of North Dakota: Lines 81 and 26 by Enbridge Incorporated (NYSE:ENB) (Calgary, Alberta), and the Double H pipeline by Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas). Together, they count for 439,000 barrels per day (BBL/d) of takeaway capacity. With future pipeline projects, such as Enbridge's 250,000-BBL/d Sandpiper pipeline, or the 450,000-BBL/d Dakota Access Pipeline project by Energy Transfer Partners (NYSE:ETP) (Dallas, Texas), there is potential for more than 1,000,000 BBL/d of takeaway capacity from pipelines alone, according to Industrial Info's data.

However, the EIA has reported that in May 2015, the Bakken produced only 1.29 million BBL/d of crude, down from a peak of 1.32 million BBL/d in March 2015. In addition, there are two refineries that are currently operating in the area, which account for another 88,000 BBL/d of crude oil that need not be transported out of the state, reducing the actual amount that needs be transported to just more than 1.2 million BBL/d. By contrast, there is a combined 1.6 million BBL/d crude-by-rail takeaway capacity that more than satisfies the amount of takeaway capacity demand, according to Industrial Info's research.

For related information, see July 2, 2015, article - Energy Play Highlight: Eagle Ford's Takeaway Capacity Far Exceeds Demand.

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.