Infrastructure Development Continues in Bakken Shale

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Researched by Industrial Info Resources (Sugar Land, Texas)--One of the unexpected game-changers for the U.S. oil and gas industry in the past few years has been the rapid development of the shale plays throughout the country. Billions of dollars are being invested in drilling programs in the Marcellus, Eagle Ford, Barnett, Bakken and other shale plays. Oil production in the Bakken has made North Dakota the nation's fourth largest oil-producing state, according to the U.S. Energy Information Administration. Oil production from the shale averaged a little more than 2,000 barrel per day (BBL/d) in 2000, while in 2010, oil production had increased to an average of 260,000 BBL/d in 2010. While new technologies such as hydraulic fracturing and horizontal drilling have pushed oil and gas production to new heights, much critical infrastructure still needs to be developed in the region.

Earlier this week, Enbridge Energy Partners LP (NYSE:EEP) (Houston, Texas) announced plans to further enhance its crude oil system in North Dakota by the addition of a rail-loading facility adjacent to its existing terminal in Berthold, North Dakota. In a company press release, Mark Maki, president of Enbridge Energy Partners, said of the project: "It integrates high-quality Bakken crude into Enbridge's expanding portfolio of pipeline projects that access premium markets across the United States. Importantly, it allows producers and shippers the ability to continue to grow their business while Enbridge develops the next phase of pipeline expansions on the Enbridge North Dakota System." When completed in early 2013, the project is expected to add 80,000 BBL/d of rail transport capacity.

While the primary goal of most drilling projects in the Bakken is the production of crude oil, other companies are moving in to harness the natural gas produced in the process. At this week's Wells Fargo Securities 10th Annual Pipeline, MLP and E&P, Services and Utility Symposiums, held December 6-7 in New York, New York, John Gibson, the chairman and CEO of Oneok Partners LP (NYSE:OKS) (Tulsa, Oklahoma) spoke about the need for natural gas gathering and processing infrastructure in the Bakken.

"In the Bakken, crude oil production is the primary economic driver of the development in this area. ... More than 90% of the producer's revenue comes from the oil, with favorable drilling economics at $50-$60 per barrel. Bakken producers generally view the natural gas and natural gas liquids as a byproduct of the oil they produce. Currently, many producers are flaring the associated natural gas and natural gas liquids in order to produce the crude oil, because the area lacks the gathering and processing assets," said Gibson. "What we're doing with our projects is constructing the critical infrastructure that will not only eliminate the flaring, but also enable producers to move their product to market and capture fully all the value of their hydrocarbons."

Oneok Partner's development includes the Bakken Pipeline, a approximately $550 million project running from the Williston Basin in North Dakota to a junction point near Briggsdale, Colorado, where it will meet the existing Overland Pass Pipeline. Construction is expected to kick off toward the middle of next year and be completed in late summer or early fall of 2013.

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