Enterprise Products Partners North Dakota Pipeline to Cushing

June 27, 2014 Kirk Eggleston

Bakken pipeline threatened — Pipeline Construction

Enterprise Products Partners tells a pipeline summit in North Dakota in late June of 2014 it plans to build a 1,200 mile oil pipeline from the Bakken to Cushing, Oklahoma, a major gathering and distribution hub.

The pipeline is planned to be 30 inches in diameter and would originate in Stanley, ND. Company officials said it will have a capacity of 340,000 bbls of oil and should be online by the end of 2016. The pipeline would be Enterprise's first in North Dakota.

The Pipeline Summit was hosted by North Dakota Gov. Jack Darlymple on June 24th at the National Energy Center of Excellence on the Bismarck State College Campus. This is the second such summit hosted by the governor since the Bakken oil boom began. Currently, 70% of all oil produced in North Dakota is transported by rail. Truck transport has also been used a primary means of transporting oil to pipeline/rail facilities, due to an overall lack of pipeline infrastructure in the state.

Enterprise Makes the Headlines for Oil Exporting

Enterprise also made the headlines in June when the Commerce Department’s Bureau of Industry and Security gave it and another company permission to export condensate from the Eagle Ford Shale play in South Texas to foreign buyers. The ruling marks the first time in forty years for exports of unrefined American oil, easing the oil export ban, which has been in place since the Arab oil embargo of the 1970s.

Read more: Oil Exporting Begins

The decision was handed down to the company in a private ruling from Commerce Department, according to the Wall Street Journal. The paper noted the private rulings by the Commerce Department define some ultra-light oil (i.e. condensate) as fuel after it has been minimally processed, making the oil eligible for sale outside of the U.S.

With the door open to Enterprise to export condensate from the Eagle Ford, and domestic production reaching record levels in the U.S., exports of crude/condensate from the Bakken Shale could be on the horizon.

Oil Exporting Begins

June 25, 2014 Kirk Eggleston

After nearly four decades, the Obama administration has opened the door for U.S. exports of unrefined American oil, according to The Wall Street Journal (WSJ).

The decision, WSJ reported, was approved in a private ruling by the Commerce Department's Bureau of Industry and Security, and will for now allow only two companies, Pioneer Natural Resources Co. (NYSE: PXD) and Enterprise Product Partners LP (NYSE: EPD), to export condensate to foreign buyers. PXD and EPD said they sought permission to export processed condensate from South Texas' Eagle Ford Shale, the article noted.

Condensate, which is also referred to as ultra-light oil, and light sweet crude oil make up a majority of production in the Eagle Ford Shale and to a slightly lesser extent in the Bakken Shale. Next to the Ealge Ford, the Bakken Shale produces the most light sweet crude oil/condensate in the U.S. As a general rule, lighter crudes and condensate are easier to process into refined products.

The new rule flirts with current rules put into place after the Arab oil embargo in the 70s, which allow U.S. companies to export refined products such as gasoline, but not unrefined products (i.e. crude and condensate). WSJ reports the private rulings by the Commerce Department define some ultra-light oil as fuel after it has been minimally processed, making the oil eligible for sale outside of the U.S. With the door open to PXD and EPD to export condensate from the Eagle Ford, and domestic production reaching record levels in the U.S., exports of crude/condensate from the Bakken Shale could be on the horizon.

Continental Resources CEO Pushing for Lift of Export Ban

The Commerce Department's ruling is an encouraging sign for those who have been proponents of lifting the export ban. Harold Hamm, the CEO of Continental Resources, the Bakken's largest producer, testified in January of 2014, at a hearing of the Senate Energy and Natural Resources Committee, to ease the limitations the ban imposes. Hamm, who has been outspoken on the issue, says scarcity fears on which the law banning oil exports is based no longer exist.

McKenzie County Officials Push for Temporary Housing Permits

June 20, 2014 Kirk Eggleston

When the Bakken oil boom began, thousands of people moved to Williston, Watford City and other small communities near the epicenter of the boom in North Dakota to take advantage of high-paying oilfield jobs. However, after existing housing infrastructure quickly filled up in these areas, various points on the unregulated North Dakotan prairie became home to thousands as oilfield camps and other temporary housing started to pop up. With the highest concentration of drilling activity, McKenzie County, ND, faced a big problem: how was it going to keep track of all these people? The solution came when local officials passed ordinances requiring mancamps, temporary housing complexes for oilfield workers, and RV parks obtain permits and addresses. Despite seeming like a nuisance to some locals opposed to the ordinances, the new requirements proved to very helpful for local law enforcement when an EF-2 tornado destroyed an oilfield camp south of Watford City in late May of 2014. Ultimately, the new requirements helped emergency crews pinpoint the oilfield camp's exact location after the tornado struck.

With continued demand for workers in North Dakota, and no end to the Bakken boom in sight for the immediate future, the lack of permanent housing is likely to continue. The counties with the highest concentration of licensed recreational vehicle parks and campgrounds in the state are in McKenzie, Mountrail, and Williams. As of this writing, the current active rig count in these counties is 62, 32, and 31 respectively.

North Dakota Hits the 1-Million b/d Mark

June 18, 2014 Kirk Eggleston

The State of North Dakota has surpassed the 1-million b/d oil mark according to the North Dakota Industrial Commission's (NDIC) Department of Mineral Resources (DMR), thanks mostly to the Bakken Shale and Three Forks formation.

The preliminary data, released in the monthly Director's Cut in June of 2014, revealed April oil production was 1,001,149 b/d. North Dakota is second only to Texas for oil production.

It's certain poor weather conditions at the end of 2013 and the beginning of this year prevented the production milestone from being hit sooner. According to North Dakota officials, in the month of February, there were 18 days with temperatures five or more degrees below normal. Four days were recorded where wind gusts were too high for completion work. Despite the poor weather, the state set a new record for the number of producing wells (10,186) in February. In April, North Dakota broke that record again, with 10,658 producing wells. By contrast, at the onset of the shale revolution in 2008, the state only had ~3,600 producing wells.

The Bakken region, which includes portions of western Montana, exceeded the 1-million b/d mark at end of last year according to the Energy Information Administration (EIA). It is the fourth region, along with the Gulf of Mexico, Eagle Ford, and Permian basins, producing more than 1 million b/d in the nation.

In April of 2014, Continental Resources, the Bakken's largest producer, cited IHS data revealing the Bakken field of North Dakota and Montana reached another milestone of 1 billion bbls of cumulative light, sweet crude oil produced during first quarter of 2014. According to Continental officials, two-thirds of the oil has been produced since 2011.

Highlights from June 2014 Director's Cut

Mar Oil - 977,178
Apr Oil - 1,001,149 b/d
Mar Gas - 1,085,631 mcf/d
Apr Gas - 1,133,742 mcf/d
Mar Producing Wells - 10,472
Apr Producing Wells - 10,658
ND leasing activity is low consisting mostly of renewals and top leases in the Bakken - Three Forks area

How Bakken Crude Wellhead Valuation Influences Transport

June 11, 2014 Kirk Eggleston

Since 2012, Bakken crude transport by rail has grown significantly - today nearly 70% of all crude produced is transported to the consumer by rail.

Although pipeline transport is still critical in the Bakken, much of the movement has shifted to rail due to its overall cost effectiveness, and experts anticipate this growth to continue.

In response to this increase in rail transport, Platts, an energy news and price publisher, began offering its subscribers an assessment of value nearest the Bakken crude wellhead in late April of 2014. Platts Editorial Director Sharmilpar Kaur said in a written statement that crude transport by rail has influenced industry demand for crude value assessments closer to the wellhead.

“Given the rapid growth in the transportation of crude oil by rail, the industry was in need of Bakken Shale oil value at North Dakota terminals with the operational capacity to move crude by rail or by rail/pipeline, said Kaur.”

The service captures the value of Bakken crude at the point where there is transportation flexibility either by rail, or rail/pipeline. This assessment ultimately provides industry with greater intelligence before the decision is made on using truck, rail and/or pipeline to deliver the crude to customers.

“Founder of BakkenShale.com and industry veteran Kenny DuBose, commented, “It is important to attempt to establish pricing points as close to the wellhead as possible, in order to separate and distinguish between the commodity value and any transportation expenses.”

According to Platts, in 2016, more pipelines are expected to come online in the Bakken, which should ultimately offer industry more transportation flexibility in the region. The first Platts' Bakken price assessment was 91.93 per barrel on April 23, 2014.