Like A Prayer? Central Oklahoma STACK And SCOOP Crude Infrastructure Build Out Continues

Crude oil production growth in Oklahoma over the past two years has been so rapid that apparently the State of Oklahoma “misplaced” (under-reported?) as much as 100 Mb/d of output according to a recent Energy Information Administration (EIA) report. Whatever the true production numbers a couple of central Oklahoma plays continue to attract new drilling and infrastructure investment in the face of the oil price meltdown. Today we describe new infrastructure in the region.

In Episode 1 of this series we described continued producer interest in the South Central Oklahoma Oil Province (SCOOP) and Sooner Trend Anadarko Basin and Canadian and Kingfisher counties (STACK) plays that are part of the 60,000 square mile Anadarko Basin. The Anadarko is an “old” play - in past decades successfully exploited using conventional vertical drilling. Over the past four years, producers have used horizontal drilling and fracturing technology to extract unconventional oil and condensates from shale in the basin. Crude production (mostly from Oklahoma and Kansas) grew by 300 Mb/d between 2011 and March 2015 according to the latest monthly estimates by the EIA. Crude output has since declined by 15% between March and November 2015 in the face of crashing oil prices. But within the larger Anadarko basin production continues to increase in the “sweet spot” SCOOP and STACK plays. Although these plays present geological challenges for producers - those companies that have cracked the shale code there have enjoyed superior results with high initial output from oil and condensate wells. The plays are also located conveniently close to the Cushing, OK crude market hub. These factors have encouraged a number of large producers such as Devon, Marathon and Continental Resources (the founder of the SCOOP play) to continue investing and expanding their acreage even as they pull back from other regions. In this second episode we look at recent infrastructure developments to get SCOOP and STACK crude and condensate production to market.

Blueknight Energy Partners

Blueknight Energy Partners (BKEP) is a midstream Master Limited Partnership (MLP – see Changing Horses In Midstream) owned by trading company Vitol and private equity outfit Charlesbank Capital Partners. Vitol purchased BKEP’s midstream assets from SemGroup in 2009 including three crude oil gathering systems in the Mid-Continent. The largest of these three is the Oklahoma Mainline System – a 25 Mb/d, 510-mile long pipeline network that gathers wellhead crude from central Oklahoma and delivers it to regional refiners and to Cushing, OK. BKEP also own and operate 6.6 MMBbl of commercial storage at Cushing - the trading hub that is the delivery point for the CME/NYMEX West Texas Intermediate (WTI) crude futures contract and the nation’s largest crude storage hub (see Just My Imagination). In the past three years BKEP has extended the Oklahoma Mainline pipeline to cater to increased shale production in the Anadarko. In September 2013 BKEP completed the 65-mile long Arbuckle southern extension from the Woodford Shale basin in Southern Oklahoma to Wynnewood, OK The map in Figure #1 shows the Arbuckle in cyan and the rest of the pipeline north from Wynnewood to Cushing (more on that section in a minute). The Arbuckle was built as part of a long-term transport arrangement with XTO Energy Inc. – a subsidiary of ExxonMobil Corporation that is the largest leaseholder in the Woodford Shale.