My Head’s In Mississippi – New Crude Pipelines to Deliver Bakken Crude to St. James

Data from our friends at Genscape indicates that an average 150 Mb/d of Bakken crude is being unloaded at the Plains All American and NuStar Energy partners rail terminals at St. James, LA. That is down from 250 Mb/d just two years ago (April 2013) but still represents a substantial target for pipeline developers to aim for. The first significant project to offer pipeline service from North Dakota to St. James is being developed by Energy Transfer and Phillips 66. Today we review the project details.

A couple of weeks ago we started this blog series with a look at proposals for the build out of pipelines that will link rising crude oil production in the Permian Basin with refineries in the Louisiana/Mississippi Gulf Coast region – relieving an oversupply of light crude into the Texas Gulf Coast region (see My Head’s In Mississippi – Part 1). The first of these proposals would allow crude shipped on Sunoco Logistics’ (part of Energy Transfer Partners) pipelines out of Midland, TX to flow to the ExxonMobil (XOM) Baton Rouge, LA refinery by reversing an existing XOM pipeline into Longview, TX. A second proposal aims to build a lateral from the 400 Mb/d Plains All American (PAA) operated Basin pipeline out of the Permian at Duncan, OK to Longview. From there a PAA joint venture project with Delek refining plans to build the Caddo pipeline to Shreveport, LA feeding local refineries including Delek’s El Dorado, AR plant and potentially facilitate barge movements to other Gulf Coast refineries via the Mississippi. This time we look at ongoing efforts to ship crude from North Dakota to refineries in the Mississippi valley.

We have blogged extensively about the development of crude takeaway capacity to ship growing production from the Williston Basin – primarily in North Dakota – to coastal refining centers. Early pipeline constraints out of North Dakota via Clearbrook, MN on the Enbridge Lakehead system or via Guernsey, WY on the Bridger and Spectra/Platte pipelines led to the build out of rail loading capacity to deliver crude past congestion in the Midwest (see From a Famine of Pipeline to a Feast of Rail). The rail build out added close to 1 MMb/d of rail takeaway capacity at 20 terminals by February 2013 (see Crude Loves Rock’n’Rail). Rail proved to be a flexible solution to pipeline congestion because it could be developed quickly for a low upfront investment and higher per barrel freight costs were offset by higher crude prices at coastal destinations. Crude by rail (CBR) shipments from the Bakken initially targeted Cushing, but rail volumes quickly transitioned to the Gulf Coast region (home to 50% of U.S. refining capacity) and then as pipelines from the Midwest to the Texas Gulf Coast were built out in 2013, favored East and West Coast destinations (see On The Rails Again).

FUNDAMENTALS WEBCAST WEDNESDAY!!!

RBN Energy's first 2015 Fundamentals Webcast for Backstage Pass subscribers has been scheduled for Wednesday, May 6th at 2:30pm central time. In this session, Rusty Braziel's presentation will examine the impact of low crude oil prices on oil, gas and NGL production.

More information on Backstage Pass here.

As we have detailed more recently, data provided by the Energy Information Administration (EIA) shows CBR movements out of the Bakken fluctuating with price differentials between inland crudes priced against West Texas Intermediate (WTI) at Cushing, OK and coastal crudes priced against Brent or Light Louisiana Sweet (LLS - see A Look At the (Crude by Rail) Track Record). And since the CBR loading terminal build out in 2012 a number of pipeline projects have been completed that increased potential flows of Bakken crude out of North Dakota to Cushing and from there to the Texas Gulf Coast on the Enbridge/Enterprise Seaway pipeline to Houston or the TransCanada Cushing Marketlink pipeline to Nederland, TX. As differentials between Brent and WTI narrowed in 2014, these pipelines began to win back traffic from the railroads (see I Can’t Stand The Train and Under Pressure). More recently, crashing crude prices since last summer (2014) have made higher rail transport costs out of North Dakota less attractive than pipeline alternatives (see Boom Clap The Sound of My Netback). Rail movements are also under increasing threat with new Department of Transport safety regulations announced Friday (May 1, 2015) likely to increase costs further.

To access the remainder of My Head’s In Mississippi – New Crude Pipelines to Deliver Bakken Crude to St. James you must be logged as a RBN Backstage Pass™ subscriber.

Full access to the RBN Energy blog archive which includes any posting more than 5 days old is available only to RBN Backstage Pass™ subscribers. In addition to blog archive access, RBN Backstage Pass™ resources include Drill-Down Reports, Spotlight Reports, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. If you have already purchased a subscription, be sure you are logged in For additional help or information, contact us at info@rbnenergy.com or 888-613-8874.