Two Companies Plan Bakken Pipelines After Competitors Fail Similar Endeavor

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Researched by Industrial Info Resources (Sugar Land, Texas)--Enterprise Products Partners LP (NYSE:EPD) (Houston) is investigating a crude-oil pipeline prospect that would run from the Bakken Shale to the U.S. Gulf Coast through pipeline-friendly states like Colorado and Wyoming, as opposed to states where previous plans from other companies have failed. Meanwhile, Energy Transfer Partners (NYSE:ETP) (ETP) (Dallas, Texas) has emerged with a plan to build a more indirect route to the Gulf Coast. Based on similarly structured projects to Cushing, it may meet with more success.

To date, Koch Industries (Wichita, Kansas) and ONEOK Incorporated (NYSE:OKE) (Tulsa, Oklahoma) both have announced, investigated, and then summarily canceled plans to build Bakken-to-Cushing crude oil pipelines. Both companies proposed to build directly south from North Dakota to Cushing, Oklahoma, across land that is largely unused for pipelines.

While Enterprise's project also is a direct route from Bakken to Cushing (and therefore to the Gulf Coast), ETP's project, dubbed Dakota Access, does not deliver directly to Cushing. Instead, it delivers oil to Patoka, Illinois. While the route has not yet been chosen, there are existing pipeline rights-of-way in which the new pipe could be situated, avoiding the need to dig up (and therefore permit digging up) untouched land.

From Patoka, there are multiple options to get the crude oil to market, including ETP's own Eastern Gulf Crude Access pipeline project, which would bypass Cushing and deliver directly to Louisiana refiners.

Rather than build a massive new pipeline directly to Cushing, ETP is taking a shorter route to the Midwest first. This situation is similar to the one between the Keystone XL pipeline (KXL) project by TransCanada Corporation (NYSE:TRP) (Calgary, Alberta) and the Mainline Enhancement project by Enbridge Incorporated (NYSE:ENB) (Calgary). Where KXL is mired in regulatory red tape and is a massive, direct line, the Mainline Enhancement is facing considerably less push-back and is a collection of smaller pump additions.

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For more on Enbridge and TransCanada's differing strategies, see May 28, 2014, article - Canadian Pipeline Giants Enbridge, TransCanada Differ Greatly in Project Strategies.

Likewise, where Koch and ONEOK failed to find shipper interest in a single, massive, direct line to Cushing, ETP may find shippers more agreeable to their Enbridge-like approach of a shorter line to a second market. The two analogues may actually have a causal relationship, as shippers noted the trouble encountered by KXL as opposed to Mainline, which could have put them off a similarly grand and direct route.

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