Enbridge questions Bakken numbers
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Gary Park For Petroleum News Bakken
Enbridge is not going to shape the expansion of its pipeline strategy around sky-high forecasts of incremental growth in Bakken production and is cool to the idea of shipping those volumes to the Cushing, Okla., hub, the company’s liquids pipelines President Steve Wuori said at an investor day Oct. 3.
While conceding that as little as two years ago no one in Enbridge saw the explosive growth in light crude output from the Bakken and Western Canada, he said Enbridge is taking a more “muted” view of general forecasts that Bakken volumes could rise “hundreds of thousands” of barrels a day to 1.2 million bpd.
“We have no intention of building pipe capacity” to meet that target “because the business does fluctuate.”
“If you look at production growth profiles, our view is that we should not be trying to attack the top of the curve. Our view is to compete for the core that’s going to be there for a long time to come,” Wuori said.
He said top-of-the-curve forecasts could turn out to be “whimsical,” while core barrels, which might currently be moving by rail, “should be movable to pipelines with better economics and market access.”
Although Enbridge does not want to trail the field in providing new pipeline capacity “we are very much hoping that the production profile that will emerge (for the Bakken) will rely not so much on hope, but on what appears to be certainty,” he said.
Falling US crude demand Wuori also emphasized that pipeline planning should be measured against a backdrop of falling United States crude demand, which Enbridge estimates could drop to about 14.5 million bpd in 2020 from 16 million bpd in 2010.
“It’s an open question whether that will happen,” given that the answer is tied so strongly to the almost total elimination of imports from outside North America by 2020, he said.
But, for now, Enbridge is counting heavily on its C$3.1 billion Eastern Access program, which consists of five projects to deliver 750,000 bpd of Bakken and Western Canadian light crude to refineries in Eastern Canada and the eastern PADD II market.
It is also gauging interest through an open season from potential shippers for its Sandpiper project from North Dakota to Superior, Wis., and startup in the first half of 2015, but Wuori would not confirm reports of capacity in the range of 325,000-350,000 bpd ahead of a formal announcement.
He said there is certainly a market for light crude on the East Coast and Philadelphia, which is “why we are seeing rail doing so much shipping.”
Competition at Cushing But Enbridge does not believe incremental Bakken barrels should be destined for Cushing “where they will have to fight” for market share with Permian, Niobrara, Mississippian, Canadian and other barrels.
“We don’t think that simply getting more Bakken production to Cushing is the right price move for producers,” Wuori said.
He said Enbridge’s pipeline planning is underpinned by secure refining or producer commitments.
In that context, Wuori offered a blunt assessment of rival TransCanada’s proposal to convert part of its underutilized natural gas Mainline from Alberta to Eastern Canada to carry up to 900,000 bpd of Western Canadian and U.S. crude to refineries in Ontario and Quebec, with a possible extension to Atlantic Canada.
He questioned the risks involved in “building a speculative pipeline just on the notion that hitting tidewater is a good thing,” and challenged the idea of a bullet line that would extend from Alberta to Ontario without passing close to any other markets.
Wuori said Enbridge’s main crude oil pipeline from Alberta is close to Minneapolis and Chicago refineries and provides the option of access the Gulf Coast and eastern PADD II refiners.
As a pipeline company, Enbridge believes it needs secured contracts for a minimum of 10 years “to make sure the capital you deploy is not left hanging if price differentials swing wildly in one direction or the other,” he said.
In response to Enbridge’s position, Justin Kringstad, director of the North Dakota Pipeline Authority, said the following in an Oct. 3 email to Petroleum News Bakken: “To start, let me say that Enbridge has been a first-class operator in the state of North Dakota and we could not be more excited about their past and potential expansions to ensure production from this region is moved safely to markets around the US. Whether building hotels or pipelines, no business wants their investment to be utilized for a short-term peak. I agree with Enbridge’s outlook of expanding export pipeline capacity to handle the bulk of future production, while leaving the peak production to be moved by more flexible methods, such as rail. How large the region’s pipeline infrastructure should be in order to handle the base production is open for debate and production forecast’s such as ours will continue to be adjusted as technology and markets change. I think Enbridge is positioning themselves well in the Williston Basin with major expansion plans such as the Sandpiper Pipeline and the Berthold rail facility. I believe in the long term, this combination of pipeline and rail will work very well for Enbridge and the North Dakota petroleum industry as a whole.”
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