Enterprise Halts Plan for Bakken Oil Pipeline as Prices Collapse

Enterprise Products Partners LP, the second-largest midstream company in the U.S., canceled plans for a pipeline delivering Bakken oil to Oklahoma amid plunging oil prices and competing pipeline projects.

There wasn’t enough interest from potential shippers to go ahead with the project, Houston-based Enbridge said in a statement today. The line would have carried 340,000 barrels of Bakken a day to the Cushing, Oklahoma, storage hub from North Dakota starting in 2016.

U.S. crude futures have fallen 37 percent in the past three months to a five-year low of $57.81 a barrel today amid a surge of U.S. output. The Independent Petroleum Association of America warned last month that crude producers in the Bakken shale region and other tight-oil plays will probably trim output next year because of the price drop. True Companies, Hiland Partners and Energy Transfer Partners LP are among those developing pipeline projects to move more Bakken to market.

Enterprise’s decision is “not really surprising, given the other competing pipeline projects that are under way to delivery oil out of the Bakken,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by telephone today. “In totality, all of these pipelines add about another 1 million barrels a day of takewaway capacity out of the Bakken, which really makes the Enterprise project questionable.”

Bakken crude has traded at an average discount to U.S. benchmark West Texas Intermediate crude of $5.38 a barrel over the past year, data compiled by Bloomberg show. The discount reflects the costs of transporting the crude from North Dakota to refineries. The oil was assessed at $52.56 a barrel today, $5.25 below WTI.

North Dakota’s Bakken formation supplies more than 1 million barrels of oil a day. At the end of last year, there was pipeline space for about 583,000 barrels a day of it. That’s forecast to grow to 773,000 by the end of this year and to as much as 1.7 million barrels a day by the end of 2017, according to the state’s Pipeline Authority.

Oil that can’t be shipped by pipeline is sent in rail cars, at a cost of $10 to $15 a barrel.

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