Something Blowin' In The Wind? -- Pipelines And The Bakken -- November 6, 2018

With the DAPL still being played out in two courts, the Voyager Pipeline news earlier this morning may be more than just another footnote in the history of the Bakken.

Tallgrass Energy.

Pony Express Pipeline. From the website:

The approximately 760-mile Pony Express (PXP) crude oil pipeline originates in Guernsey, Wyo., and runs through Colorado, Nebraska and Kansas, connecting with three refineries before terminating in Cushing, Oklahoma.

PXP sources oil from the Bakken, Denver Julesburg and Powder River plays, delivering five distinct common streams for our customers – Bakken Light Sweet, Mixed Sweet, Niobrara, Pony Express Light and Central Kansas Uplift – to the Cushing oil hub for distribution to markets across the country.

Placed in service in 2014, Pony Express has a design capacity of 320,000 barrels a day, and based on a number of factors has the capacity to transport additional barrels.

Answering producers’ call for more pipeline capacity out of the Bakken, Tallgrass built PXP and signed joint tariff agreements with two other pipelines to seamlessly deliver Bakken crude to Cushing, Okla., and points in between.

To meet the transportation needs of producers in both the Bakken and Rockies regions, Tallgrass converted a 430-mile natural gas pipeline and built another 260 miles of pipeline to extend PXP through southern Kansas into Oklahoma. The 70-mile Northeast Colorado Lateral (NECL) adds optionality for producers in the Niobrara Shale in Northeastern Colorado and Southeastern Wyoming, intersecting Pony Express east of Sterling, Colo. Before terminating in Cushing, PXP connects to Holly Frontier’s and CHS McPherson’s refining complexes in Kansas and to Phillips 66’s Ponca City, Okla., refinery.

Earlier this year, from SeekingAlpha, June 26, 2018:

• Tallgrass Energy Partners LP and Tallgrass Energy GP announced that, the unitholders approved the stock-for-unit merger transaction
• he merger transaction is expected to close on June 29, 2018 and be effective as of June 30, 2018
• upon completion of the transaction, TEGP will change its name to Tallgrass Energy, LP, also TEGP’s Class A shares will trade on the NYSE under the ticker symbol “TGE” and TEP’s common units will no longer be publicly traded

Tallgrass Energy / PXP (Pony Express Pipeline): at this website.

The Double H Pipeline from Dove, ND, to Guernsey, Wyoming.

Kinder Morgan Hiland.

From a recent RBN Energy blog, November 1, 2018:

Kinder Morgan, on its third-quarter earnings call, briefly discussed additional capacity they could provide on their Double H pipeline. The Double H pipeline originates near Dore, ND, and carries crude to the Rockies trading hub in Guernsey, WY. There, the line connects with Tallgrass Energy’s Pony Express Pipeline for transport to Cushing, OK. Double H has a current capacity of 84 Mb/d but Kinder Morgan has said a small expansion is possible inside of six to eight months, likely increasing the pipeline’s capacity to about 110 Mb/d.

Meridian Energy is also working on completing the Davis Refinery in Belfield, ND, by 2020; it will be one of the few new U.S. refineries to be constructed in the last 45-plus years and will have a capacity of 49 Mb/d. All in, area producers could see an additional 175 Mb/d of capacity and in-region refining demand added if commitments go through on all of these projects.

Figure 2. Bakken Takeaway Pipelines and Davis Refinery. Source: RBN (Click to Enlarge)

In our supply/takeaway forecast, we have assumed that the DAPL and Double H pipeline expansions are completed in the next six months, and that the Davis Refinery comes on at the beginning of 2020. 

Assuming those things happen on time, we still forecast production to be running up against the maximum pipeline takeaway capacity near the beginning of 2019. 

For this analysis, we are using our price-based, middle-case growth scenario for the Bakken, which follows the forward curve prices into 2023. 

In this scenario, production in the Bakken grows from the EIA’s 1.34 MMb/d number for October 2018 to 1.70 MMb/d by the end of 2023. Because DAPL does not have a current end-date for its open season, and Double H has not formally announced its expansion yet, there’s a strong chance these projects will bleed further into 2019, extending the period of time that producers have to wait for additional space.

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The Literature Page

From The New Journalism, edited by Tom Wolfe, c. 1973, page 26:

Truman Capote had spent five years researching [In Cold Blood] and interviewing the killers in prison, and so on...But in 1966 you started seeing feats of reporting that were extraordinary, spectacular. 

Here came a breed of journalists who somehow had the moxie to talk their way inside of any milieu, even closed societies, and hang on for dear life. A marvelous maniac names John Sack talked the Army into letting him join an infantry company of Fort Dix, M Company, 1st Advanced Infantry Training Brigade -- not as a recruit but as a reporter -- and go through training with them and then to Vietnam and into battle. The result was a book called M (appearing first in Esquire) a nonfiction Catch-22 and, for my money, still the finest book in any genre published about the war.

From page 292, by Tom Wolfe:

John Sack interviewed the soldiers of M Company about what had been going through their minds during certain adventures, then made these thoughts and feelings part of the action itself as he described it. Sometimes this took the form of brief interior monologues. M first ran in Esquire, and Esquire's lawyers threw their hands up over this use of other people's thoughts on the grounds that it opened the way to invasion-of-privacy suits unless Sack could get written consent from each soldier involved.

It is an indication of Sack's perseverance, not to mention his accuracy, that he thereupon backtracked and got in touch with every living soldier who was mentioned -- they were spread out from Maine to Vietnam -- showed them the manuscript and got their OKs. -- T.W. 

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St Charles '76

St Charles '76, Jefferson Starship