Pipeline capacity constraints are nothing new to producers in the Bakken. Prior to the completion of the Dakota Access Pipeline (DAPL) in mid-2017, market participants had been pushing area pipeline takeaway to the max. When DAPL finally came online following a lengthy political and legal battle, producers and traders were able to breathe a sigh of relief. But with Bakken production steadily increasing over the past 18 months — and primed for future growth — new constraints are on the horizon. Over the next year or so, Bakken output could overwhelm takeaway capacity and push producers to find new market outlets. The questions now are, which midstream companies can add incremental capacity, how much crude-by-rail will be necessary, and is there a chance a major new pipeline gets built? Today, we forecast Bakken supply and demand, discuss some upcoming projects and lay out the possible headaches for Bakken producers heading into 2019.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
We discussed the history and impact of DAPL in our Take My Crude Away blog, but here’s a quick recap. Prior to the commercial start-up of the new pipeline to Patoka, IL, in June 2017, Bakken producers had long battled with takeaway constraints. As far back as 2012, production (blue area in Figure 1) had outpaced the modest amount of pipeline capacity available (green line) and producers and traders resorted to moving excess production via crude-by-rail (CBR). CBR isn’t inherently bad, and does provide the ability to reach multiple markets, but it’s expensive, logistically challenging, and slow (compared to a pipeline). When DAPL came online, producers were faced with a new market dynamic — excess pipeline takeaway capacity. Bakken crude began to trade at a premium to West Texas Intermediate (WTI) at Cushing, as take-or-pay shippers were forced to compete with one another and pay up to incentivize barrels to move their way. Currently, Bakken barrels at the Clearbrook hub are trading at a $8/bbl discount to WTI at Cushing, influenced by market dynamics related to those also causing wide differentials for Canadian barrels, which we discussed in Part 1 of this blog series.
Join Backstage Pass to Read Full Article
About the song
"Push Me, Pull Me," written by Jeff Ament and Eddie Vedder, is the twelfth cut on Pearl Jam's fifth studio album, Yield. Yield represented a more collaborative approach to the group's songwriting, and a return to the more basic rock sound of their earlier efforts. The LP was recorded during 1997 at Studio X and Studio Litho in Seattle, with mixing done at Southern Tracks and Doppler Studios in Atlanta. Production duties were by Brendan O'Brien and Pearl Jam. The album was released in on February 1998, and debuted on the Billboard Top 200 Albums chart at #2. The LP has been certified platinum by the Recording Industry Association. Personnel on the record were: Jeff Ament (bass and vocals), Stone Gossard (guitar and vocals), Jack Irons (drums), Mike McCready (lead guitar), and Eddie Vedder (lead vocals and guitar). This would be the last album with Jack Irons on drums.
Pearl Jam is an American rock band formed in Seattle in 1990 after Jeff Ament and Stone Gossard's band, Mother Love Bone, lost their lead singer, Andrew Love, to a drug overdose on the eve of their debut album's release. With a new band, originally called Mookie Blaylock (after the NBA star), they forged on, landing a new record deal that resulted in their debut album, Ten (named after Mookie's jersey number), being released under their new name, Pearl Jam, in 1991. Known as one of the progenitors of the Seattle grunge sound, Pearl Jam has sold over 85 million records worldwide, and more than 32 million in the U.S. They have won two Grammy Awards, four MTV Video Music Awards, and five American Music Awards. The band was inducted into the Rock and Roll Hall of Fame in 2017, their first year of eligibility. There are rumors of a new album and tour from the band coming in 2019.
