ONEOK Bakken Crude Express Still On Hold, Despite Bakken's Production Increase

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Researched by Industrial Info Resources (Sugar Land, Texas)--Current forecasts indicate that by the end of 2013, oil production in the Bakken Shale could reach 1 million barrels per day (BBL/d). The worry over how to move this massive amount of oil has grown proportionally, yet a major pipeline project, ONEOK Incorporated's (NYSE:OKE) (Tulsa, Oklahoma) Bakken Crude Express, remains on hold. The reason may be that the worry over export capacity is misplaced, as some projections indicate that oil export capacity in the Bakken is keeping pace with--or even outstripping--production.

Since February 2006, the number of producing oil wells--and consequently the amount of daily oil production--in the Bakken Shale has been steadily climbing. At the beginning of the climb, there were 226 wells producing more than 4,000 BBL/d of crude oil. In September 2013, those numbers reached upwards of 6,400 and 867,000 BBL/d, respectively.

There are essentially four options for crude oil export: truck, pipeline, rail or local refining. In September 2013, North Dakota produced more than 867,000 BBL/d of crude oil, and had roughly 680,000 BBL/d of rail takeaway capacity. Year-end pipeline/refining takeaway capacity for 2012 was more than 580,000 BBL/d and was expected to reach more than 780,000 BBL/d by the end of 2013 with the addition of more pipelines. With the estimate of 1 million BBL/d of production by the end of 2013, between these three methods of takeaway alone (not counting trucking, the most expensive of all four) North Dakota will have roughly 1.46 million BBL/d in takeaway capacity.

Allowing for a growth rate of 150,000-plus BBL/d per quarter, slightly higher than what can be expected between September 2013 and December 2013, the Bakken can expect to see 1.6 million BBL/d in production by the end of 2014. Counting only existing planned refining and pipeline projects, North Dakota can expect to have roughly 1.66 million BBL/d of takeaway capacity. Add to that the 300,000 million-BBL/d increase in rail capacity over the same timeframe, and the Bakken looks to have adequate infrastructure for oil exports, pending no booms in production or busts in export infrastructure through the end of 2014.

These numbers assume that all the relevant projects are completed and their infrastructure put into service on time. Accounting for delays, it is possible that there will be some bottlenecking in mid- to late 2014; however, even with reasonable delays, the number of capacity expansions and new facilities being planned should bring about a rebalancing in 2015. As such, if takeaway capacity is projected to be enough to handle production, the need for a new pipeline like the Bakken Crude Express is diminished, and would explain why the project remains on hold.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine 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.