No sooner had we finished up our analysis of the divergent fates of two North Dakota crude oil pipeline projects - the Enbridge Sandpiper (going ahead after a successful second open season) and the Koch Dakota Express (cancelled in January) – then we learned that competitor Energy Transfer Partners (ETP) had launched a binding open season for a third pipeline proposal following basically the same route. The ETP press announcement provided few specifics but it seems remarkably similar to the cancelled Koch proposal. Today we look at plusses and minuses of this new pipeline proposal.
The First Two Proposals
Just a couple of weeks ago we reviewed the competing Enbridge Sandpiper and Koch Dakota Express pipeline projects that were both designed to increase takeaway capacity from Bakken production in North Dakota. In Episode 1 of that two part series we noted that the Sandpiper project moved forward in February of this year (2014) while the rival Dakota Express project hit the skids when its sponsor Koch Industries pulled the plug in January. Our analysis showed that neither pipeline was absolutely required to move Bakken production to market if you included rail-loading capacity in the takeaway equation – but noted that pipeline options are cheaper than rail and therefore can be more attractive to shippers, particularly when they offer flexibility to reach multiple markets. In Episode 2 we compared the routes and connections that the two rival pipeline projects offered Bakken producers and concluded that the Enbridge Sandpiper project was likely more successful in attracting shippers than Koch because of its greater flexibility of destinations.
Proposal Number Three
When yet another North Dakota pipeline proposal open season showed up at the start of March we wondered what such a project could offer Bakken shippers that they could not get from Sandpiper or the 20 odd rail loading terminals that compete with it? We start our understanding of the answer to that question with the project details provided so far.
In their announcement on March 7, 2014, ETP launched a binding open season to solicit shipper commitments for crude transportation service for Bakken production to multiple markets via two pipelines. The two pipelines will be operated by separate ETP subsidiaries. The first subsidiary is Dakota Access, LLC that proposes a pipeline from “point(s) of origin in the Bakken play in North Dakota to a terminus in Illinois”. The second subsidiary is Energy Transfer Crude Oil Company (ETCO) that proposes to provide transportation service through a pipeline “from point(s) of origin in the Midwest to the crude oil terminalling facilities of Sunoco Logistics Partners L.P. at Nederland, Texas, with various potential points of destination along the pipeline.” The capacity of the two proposed pipelines is to be determined by the level of shipper commitment during the open season. Shippers may commit to just the Dakota Access pipeline or to both Dakota Access and ETCO. Committed Shippers would have the flexibility of selecting a term of 5, 7, or 10 years, depending on destination point. The pipeline anticipated commencement of service date is 2016.
Although the publically released details of this new pipeline project are spartan as far as origin and destination go, it seems highly likely that the ETCO leg of the proposal – from the Midwest to Sunoco’s Nederland terminal on the Texas Gulf Coast at Port Arthur is none other than the existing ETP project now known as the Eastern Gulf Crude Access Pipeline (EGCAP – previously called the Trunkline reversal). We first described that project in June 2013 (see The Enbridge SAX and East Gulf Pipe Band) and then detailed how shippers on the cancelled Dakota Express would potentially have used EGCAP to get their crude to the Gulf Coast. Since EGCAP is currently expected to start at Patoka in Illinois and terminate at Nederland and will have a starting capacity of 420 Mb/d it seems unlikely that ETP would build another pipeline along the same route. So the ETCO leg is either going to be the same project as EGCAP or possibly an expansion.
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