Sandpiper

Delays to the Enbridge Sandpiper project bringing greater volumes of Bakken crude onto the Enbridge Mainline system at Superior, WS threaten to limit the supply of crude to feed refineries in Quebec when Enbridge’s Line 9B reversal project comes online in November 2015. The market impact could push crude prices higher in North Dakota. Today we discuss the crude supply picture and possible impact when Line 9B opens up.

Yesterday (August 3, 2015) Brent crude closed under $50/Bbl for the first time since January 2015. At that price expensive crude-by-rail (CBR) freight costs to the East Coast leave Bakken producers with netbacks not much over $30/Bbl. Yet CBR shipments to the East Coast were still over 400 Mb/d in May 2015 according to the Energy Information Administration (EIA). By 2017 there should be adequate capacity to get all Bakken crude to market by pipeline. But direct pipeline competition against rail to the East Coast is not expected until at least 2020. Today we look at the future of East Coast CBR.

The Enbridge crude oil network is North America’s largest. Its original objective was to deliver western Canadian crude to refineries in the US Midwest. Many of those refineries like the 413 Mb/d BP Whiting complex south of Chicago have spent billions upgrading to process heavy Canadian crude. But the shale boom is adding significant volumes of light crude to the Enbridge system, particularly in North Dakota. So now the company is expanding capacity to get that light crude to market in eastern Canada and the US Midwest. Today we continue our coverage of Enbridge’s expansion plans.

Enbridge own and operate the longest liquids pipeline system in North America extending from Fort McMurray in Alberta to Montreal in Eastern Canada and south through the US Midwest to Freeport on the Texas Gulf Coast. Although the major purpose of the pipeline is to deliver heavy western Canadian crude, it also carries light crude to eastern Canada and the US Midwest. Projects underway that are expected to be completed at the end of 2014 will expand flows of light crude to the east by 400 Mb/d. Today we continue our series reviewing the Enbridge initiatives with the Light Oil Market Access (LOMA) projects.

In the latter half of 2013 two very similar pipeline projects dueled it out with shippers in North Dakota to secure commitments to move crude out of the Bakken into the Midwest and points south. After addressing some concerns raised by federal regulators about tariff structure, the Enbridge and Marathon Petroleum Company Sandpiper proposal appears to be on track for approval. The rival Koch Dakota Express project was abruptly cancelled in January of this year. In pure capacity terms both these pipelines were “nice to have” not “need to have”. Today we complete our analysis of the fate of these competing projects.

Since the start of 2014 two competing pipeline projects designed to provide crude producers in North Dakota with additional takeaway capacity have met with very different fates. The first proposal – the Sandpiper project launched by Enbridge in late 2012 has completed a successful Open Season and petitioned federal regulators for approval of its tariff structure. Sponsor Koch Industries quietly canceled the second competing proposal – the Dakota Express pipeline first proposed in July 2013. Looking at rail and pipeline takeaway capacity versus crude production in North Dakota, both these pipelines are “nice to have” not “need to have”. Today we begin a two part analysis of these competing projects.