The crude-oil price crash of the past couple of weeks is forcing producers in every U.S. shale play to reassess their drilling-and-completion plans for the balance of 2020. Still, while the pace of activity in the Permian, the Bakken and other major plays may slow somewhat in the coming months if crude prices stay low, the vast majority of the new wells that are drilled will need to be connected to crude gathering systems — ideally ones that offer producers and shippers a high degree of destination optionality. Today, we continue our series on crude-related assets in western North Dakota with a look at another leading midstreamer’s gathering system, and its link to the Dakota Access Pipeline and a nearby refinery.
It will probably be a while before all of us have a better sense of the range in which crude oil prices will settle. What we already know — and have known for some time now — is that the four North Dakota counties (McKenzie, Dunn, Mountrail and Williams) that account for nearly 90% of Bakken production offer producers some of the best, most productive rock in the U.S. We also know that there is a relatively strong relationship between crude oil prices and Bakken production. As we said in Part 1 of this blog series, the shale play’s output peaked at ~1.26 MMb/d in December 2014, a few months after crude prices started tumbling, then bottomed out at ~960 Mb/d in December 2016, a few months after prices cratered. Since then, it’s been mostly up, up and up. By July 2018, Bakken production topped its December 2014 peak of ~1.26 MMb/d, then sped past 1.4 MMb/d in October 2018 and 1.5 MMb/d in October 2019. We mentioned in the same blog that there have been challenges to the Bakken rebound, including a shortfall in crude oil pipeline capacity out of the play — which was largely solved by the June 2017 startup of the Dakota Access Pipeline (DAPL) — and, more recently, the need for more gas processing capacity to handle the large volumes of associated gas emerging from Bakken wells with crude oil. Gas processing constraints are well on their way to being solved, thanks to the addition of a number of new processing plants in 2019 and early 2020, and the late-2019 startup of the Elk Creek NGL pipeline that will help folks deal with all the mixed NGLs coming out of those processing plants.
In Part 2, we began our review of major crude gathering systems in the Bakken with a look at Hess Midstream’s pipelines and related assets. Owned primarily by Hess Corp. — a leading Bakken producer — and Global Infrastructure Partners, Hess Midstream owns and operates about 400 miles of crude oil gathering pipelines with a throughput capacity of 160 Mb/d, as well as two crude oil terminals, a crude header system and a big crude-by-rail facility. Then, in Part 3, we shifted our focus to the crude-related systems and assets owned by two other good-sized midstreamers: Enable Midstream Partners and Crestwood Equity Partners. Enable has two crude gathering systems with a total of about 175 miles of pipe, while Crestwood has a total of about 700 miles of pipe for gathering crude, natural gas and produced water, as well as the COLT Hub, with its storage tanks and crude-by-rail terminal.
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