Here We Go Again, Part 2 - Is the Bakken Heading Towards a Crude Pipeline Overbuild?

Bakken crude oil production surpassed 1.4 MMb/d this spring and has maintained a level near that since, even posting a new high just shy of 1.5 MMb/d in April 2019. The rising production volumes have filled any remaining space on the Dakota Access Pipeline (DAPL) and prompted midstream companies to step up expansion efforts to alleviate the pressure, even as questions linger about the possibility of a pipeline overbuild if all of the announced capacity gets built. Specifically, the market is weighing the need for the recently announced Liberty Pipeline and a DAPL expansion. Today, we look at these two new projects and what their development means for the supply/demand balance in one of the U.S.’s biggest shale basins.

As we highlighted in Part 1 of this series, Energy Transfer’s Dakota Access Pipeline (orange line in Figure 1) to Patoka, IL, fixed a lot of the crude takeaway problems in the Bakken after its start-up in June 2017. Prior to DAPL’s completion, there was a big gap between growing Bakken output and less-than-adequate pipeline capacity out of the basin. Producers and traders in the area were forced to rely upon slower — and more expensive — crude-by-rail capacity in order to move barrels to sales markets. With its initial capacity of 525 Mb/d, DAPL served as a relief valve to area producers, and gave them the ability to connect directly to Gulf Coast markets via DAPL’s sister system, the Energy Transfer Crude Oil Pipeline (ETCOP; yellow line) from Patoka to Nederland, TX. DAPL, which was later expanded to 570 Mb/d, also allows producers to reach Midwest refiners if they choose to off-ramp at Patoka.

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