Updated June 26, 2023
(February 3, 2023, Argus) - The Army Corps is expected to release a long-anticipated environmental review of the Dakota Access Pipeline (DAPL) this spring. Opponents of the pipeline were in a battle in the courts even before the DAPL's commissioning in 2017. After the Army Corp EIS study is complete, a 45-day public comment period ensues. The final version of the EIS will lead to a record of the decision on the easement from the Army Corps, which could have consequences for the pipeline, according to the Harvard Law School's Environmental and Energy Law Program (EELP).
Hedging Considerations: Using financial derivatives to hedge price risk at either Clearbrook or Guernsey can be difficult. There is little or any liquidity in forward pricing for Bakken-linked crude differentials. Many counterparties do not make a market for these prices; if they do, spreads can be quite wide.
Last update: 3/13/2023
February 28, 2023 - Oil prices in the Bakken have traded relatively stable in the past twelve months between +$2.25/Bbl and +5.50/Bbl to WTI. Following the DAPL buildout, excess crude takeaway capacity has helped Clearbrook prices avoid steep price discounts observed in the past. Looking forward, we expect Bakken to continue trading at a nominal premium to WTI at Cushing as long as production growth remains near post-COVID 19 levels.
|Bakken Shale Overview
The Williston Basin, compared to many basins worldwide, is a structurally simple basin. It is roughly circular, deepest in its center, and the strata become both shallower and thinner towards its margins. It is a large basin, covering approximately 150,000 square miles over parts of North Dakota, South Dakota, Montana, and parts of the adjacent Canadian provinces of Saskatchewan and Manitoba. The basin's deepest point is thought to be near Williston, ND, where the Precambrian surface is more than 16,000 feet below the surface.
Most of the crude oil reserves in the Bakken/Three Forks is a high-quality light sweet crude with an average API gravity of around 40. These traits make it very similar to West Texas Intermediate crude that is used for the NYMEX benchmark contract.
Source: dmr.nd.gov, NGI
Major Bakken Pipeline Routes
Key crude oil pipelines that serve Bakken oil producers
Key natural gas/NGL pipelines that serve the Bakken
As of early March, active rigs in the Bakken have recently leveled off to around 42 rigs. This is eight rigs higher than this time last year but lower than the previous periods.
Source: Baker Hughes
Oil production has been relatively stable in the Bakken since late 2020, except for times when the region experiences freeze-offs. Further oil growth may depend on gas takeaway capacity. As operators are facing tough flaring restrictions, associated gas volumes can become the bottleneck in additional liquids growth. There is competition with Canada for space on gas pipelines leaving the region. If Bakken producers procure more capacity on pipes like Northern Border, then that would allow additional liquids growth.
For oil, The region is overbuilt for crude takeaway capacity. The addition of DAPL, and its recent expansion, has created an overbuild of pipe capacity for the region as a whole.
|Dakota Access Pipeline - The Dakota Access Pipeline (DAPL) is a 1,172-mile-long underground pipeline that can transport up to 750 MBbl/d of light sweet crude oil. The pipe originates in North Dakota in the Bakken formation and terminates in Patoka, Illinois. A separate Energy Transfer pipeline (ETCO) can then deliver oil to the Nederland terminal on the Texas Gulf Coast.