The Final Nail In The Enbridge Sandpiper Pipeline? -- August 5, 2016

I posted this the other day, that the Sandpiper might be at risk. Yesterday, Reuters reported that Enbridge's Sandpiper looks be latest victim of overbuild.

The long-planned and oft-delayed Sandpiper pipeline through the U.S. Midwest may not be dead, but it appears to be on life support, a likely casualty of the oil-and-gas industry's infrastructure overbuild amid a two-year global oil rout.

After years of delays, refiner Marathon Petroleum Corp and midstream giant Enbridge Inc on Tuesday announced they would scrap their joint venture agreements and transportation services for the 450,000 barrels per day Sandpiper project, instead agreeing to acquire a portion of the rival Dakota Access Pipeline. 

That $1.5 billion deal, if successful, will leave Sandpiper without Marathon as its main anchor, even though an Enbridge spokesman said plans for the line are still being evaluated. The project involves two pipeline legs stretching from North Dakota through Minnesota to Wisconsin.

Outgoing pipeline capacity from the Bakken is currently at around 641,000 bpd, according to Genscape. Once Dakota Access becomes operational, capacity will rise to 1.21 million bpd. 

That projected increase comes against the backdrop of a dramatic decline in oil prices that has weighed on production in North Dakota's Bakken play, one of the biggest beneficiaries of the boom in U.S. shale production over the last several years. 

The Dakota Access Pipeline, slated to stretch from North Dakota to Illinois, is expected to come online in the fourth quarter. With global oil futures down by 70 percent in the last two years, traders and analysts say there just is not enough crude in production in the U.S. Midwest for both pipelines.

In the short term, and possibly even long term, this gives some life to CBR since CBR still provides flexibility in getting oil to the East Coast, but in the big scheme of things, as long as North Dakota production remains around 1 million bopd or less, pipe will be adequate.