Bakken Losing East Coast Market To Rising Imports -- RBN Energy -- September 27, 2016

Active rigs:

	9/27/2016	09/27/2015	09/27/2014	09/27/2013	09/27/2012
Active Rigs	34	71	190	184	189

RBN Energy: Bakken producers losing the East Coast market to rising imports.

The prospects for sellers of Williston Basin/Bakken crude oil in what once was a prime growth market—the U.S. East Coast—have been dwindling fast, as have the volumes of Bakken crude being railed and barged to refineries along the Mid-Atlantic coast and the Canadian Maritimes. Today we look at how a combination of weak crude oil prices, declining production, high relative freight costs, and the lifting of the U.S. crude oil export ban have opened the door to more imports from West Africa, and left Bakken producers out in the cold.

The Bakken remains an American success story, but the play’s star has certainly faded along with declining crude prices. As North Dakota oil production ramped up in 2013 and 2014 (peaking at 1.3 MMb/d in December 2014), shipments of Bakken crude to the U.S. East Coast via rail rose in tandem.  From only 10 Mb/d in 2011, Bakken barrels railed to the East Coast ultimately reached 431 Mb/d in May 2015.

In the early days of CBR, midstream companies, marketers and refiners rushed to develop the infrastructure (rail terminals, rail fleets, etc.) to serve refineries in the Mid-Atlantic states and Maritime Canada. But unfortunately, about the time all that infrastructure was in place, crude prices started to decline, the number of active drilling rigs in the Bakken plummeted, and crude oil production there fell to less than 1.0 MMb/d. 

The decline in production continues today; Energy Information Administration’s (EIA’s) Drilling Productivity Report projects that Bakken crude production now (as of September 2016) languishes at only 875 Mb/d. Rail shipments to the East Coast in June 2016 averaged only 132 Mb/d, a decline of 69% since the peak in May 2015.