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Dakota, Part 2 - Hess Midstream's Bakken Crude Oil Gathering Systems and Related Assets

The Bakken was among the first plays to benefit big-time from the Shale Revolution, experiencing a 400%-plus increase in crude production in the first half of the 2010s. The play has had more than its share of challenges, however, including a serious lack of takeaway capacity that spurred the first rapid deployment of modern-day crude-by-rail, followed by a rig-count collapse and major production decline after the mid-decade crash in oil prices. But the Bakken has been roaring back. Crude output there now tops 1.5 MMb/d — some 250 Mb/d higher than its late-2014 peak — and producers have been planning for continued production growth in 2020, though many may be reassessing those plans in light of this week’s coronavirus-related price slide. In any case, production growth is only possible if there’s sufficient gathering infrastructure in place to handle it. Today, we continue our series on crude-related infrastructure in western North Dakota with a look at a leading Bakken midstreamer’s assets.

As we said in Part 1, over the past four years, Bakken producers have significantly reduced their drilling-and-completion costs and increased their productivity and per-well production. Just as important, their chronic shortfall of pipeline takeaway capacity ended in mid-2017 with the start-up of the Dakota Access Pipeline (DAPL) to Patoka, IL, whose initial capacity of 470 Mb/d has since been expanded to 570 Mb/d. DAPL significantly reduced Bakken shippers’ reliance on crude-by-rail — though substantial volumes are still railed to refineries on the West Coast — and slashed the cost of delivering most of the play’s light crude to Midwest and Gulf Coast markets. We also pointed out that DAPL has been filling up and its co-owners are considering a possible expansion; that a joint venture of Phillips 66 and Bridger Pipeline is developing the new Liberty Pipeline from the Bakken to the crude oil hub in Cushing, OK; and that a number of new gas processing plants are coming online in western North Dakota to handle all the increasing volumes of associated gas produced by the play’s crude-focused wells.

All that sets the stage for continued production growth in the Bakken in 2020 — again, assuming crude oil prices don’t collapse — and the need for new and expanded crude gathering pipelines and related infrastructure. A case in point is Hess Midstream, which owns and operates a large crude gathering network that connects Hess Corp. and third-party wells in the core of Bakken production to two crude oil terminals, a crude header system and a big crude-by-rail facility. (We’ll discuss each of these in a moment.) Owned primarily by Hess Corp. — a leading Bakken producer — and Global Infrastructure Partners, Hess Midstream also has gas gathering pipelines, gas processing plants and produced-water gathering pipelines in the Bakken.

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