Investors are excited about the potential of the Bakken and other formations in the Williston Basin in North Dakota. Although most attention is focused on the publicly traded exploration and production companies that are developing the play, a considerable amount of infrastructure is being built to process and transport the various hydrocarbons being produced.
Production GrowthIt can be difficult to project how much oil will be produced from the Bakken and Three Forks formations in future years due to the large amount of operators and high decline rates of wells in these formations. Pipeline operators are planning for a huge expansion and have various projects underway that will boost transport capacity to at least 750,000 barrels per day by 2014. This is more than double current capacity.
The Pipeline PlayersPlains All American Pipeline, L.P. (NYSE:PAA) is currently building the Bakken North project which will handle the growing production from the area. The project will cost between $160 million and $200 million, and will include a 103 mile pipeline from Trenton, North Dakota to the Canadian border. The pipeline will connect to the Wascana Pipeline System and have an initial capacity of 50,000 barrels of oil per day.
Plains All American Pipeline, L.P also has other assets in the Williston Basin, including the Trenton Gathering system. This system includes 285 miles of gathering pipelines and other infrastructure.
Enbridge Energy Partners, LP (NYSE:EEP) is also working on an expansion of the company's pipeline network to serve the development of the Bakken. The expansion will cost $370 million and will involve work in both the United States and Canada. The expansion is expected to be completed in the first quarter of 2013 and will add an incremental 145,000 barrels per day of capacity to the system.
TransCanada Corp (NYSE:TRP) is planning the Keystone XL expansion, which is expected to be in service by 2013. The expansion will add 100,000 barrels per day of extra capacity to accommodate Bakken production. The Bakken Marketlink Project would cost $140 million to build.
Pipeline Alternatives
Some operators are not waiting for pipeline to be built. In June 2010, Hess Corporation (NYSE:HES) announced that it would build a railroad terminal to ship crude oil out of the area. The facility would have a capacity of 120,000 barrels per day and will be completed by early 2012.
Some operators are not waiting for pipeline to be built. In June 2010, Hess Corporation (NYSE:HES) announced that it would build a railroad terminal to ship crude oil out of the area. The facility would have a capacity of 120,000 barrels per day and will be completed by early 2012.
EOG Resources (NYSE:EOG) built a similar facility in Stanley, North Dakota in early 2010 to transport Bakken crude to Cushing, Oklahoma. The company can expand capacity to 90,000 barrels per day if needed.
Bottom Line
The exploration and production industry is planning major development of the Bakken over the next decade and the pipeline and other midstream assets needed to get this oil to market is being built as well.
The exploration and production industry is planning major development of the Bakken over the next decade and the pipeline and other midstream assets needed to get this oil to market is being built as well.
By Eric Fox
Eric J. Fox, is the founder of Brittain Capital Management, LLC., which manages the Alesia Fund, LP., a Value oriented long/short investment partnership. You can read more of his views on investments at his blog - Stock Market Prognosticator.
