With rapidly expanding development in the oily Bakken Shale and Three Forks formations of North Dakota, Enbridge Energy Partners LP (EEP) and Enbridge Income Fund Holdings Inc. (EIF) said Monday that additional shippers have finalized capacity commitments to the Bakken Expansion Program and the companies expect that additional capacity will be required by producers in the near future.
The pipeline expansion program is being undertaken on the Enbridge North Dakota System owned by EEP, and the Enbridge Saskatchewan System, owned by EIF. Cost of the program is expected to be $560 million.
The added capacity from this expansion will be 145,000 b/d, of which 25,000 b/d will be available in early 2011 following completion of the Portal Reversal Expansion Project, and the remaining 120,000 b/d by late 2012. Under the applicable regulatory arrangements a maximum of 115,000 b/d can be held by committed shippers and at least 30,000 b/d must be reserved for uncommitted volumes.
The companies said that by Aug. 24, 2010 anchor shippers had made sufficient capacity commitments to enable the expansion to proceed. An open season was commenced on Aug. 26, 2010 to permit other shippers to subscribe for committed capacity on the same terms as the anchor shippers. Additional shippers have now executed capacity commitments under terms of the open season, the majority of which are for a term of 10 years. The combined commitments of anchor shippers and the additional shippers aggregate 100,000 b/d, leaving 15,000 b/d available for additional uncommitted volumes or subsequent committed capacity offerings.
"The Bakken and Three Forks formations represent an area of tremendous opportunity for both Enbridge Energy Partners and Enbridge Income Fund," said Stephen J. Wuori, president, Liquids Pipelines, Enbridge Inc. "Based on current activity and growth plans we anticipate that additional pipeline capacity beyond this initial Bakken Expansion Program will soon be required by producers. The ultimate expansion capacity of this program is up to 325,000 b/d with modifications and additional facilities. We will continue to work with shippers to ensure additional capacity is made available when they require it."
With natural gas prices currently seen as relatively cheap while oil commands a premium, producers in the unconventional plays have been weighting their resources towards the more liquid plays. Earlier this month Marathon Oil Corp. announced it will spend up to $1 billion this year on three of its highest "growth assets," all U.S. shale projects: North Dakota's Bakken play, the Eagle Ford in Texas and the Anadarko Woodford in Oklahoma. In the Bakken the producer plans to drill 70-75 operated wells and participate in 50-70 more wells (see Shale Daily, Feb. 3).
Last month Magnum Hunter Resources Corp., which has been on the prowl for unconventional gas and oil resources for several months, agreed to pay $325 million to acquire Bakken producer NuLoch Resources Inc. (see Shale Daily, Jan. 21).
Over the last year, drilling activity in the Bakken/Sannish/Three Forks Basin has exploded, according to NGI's Shale Daily Unconventional Rig Count (see shaledaily.com). In February 2010 only 90 or so rigs were drilling in the region. Currently, there are more than 160 rigs operating in the play.
Enbridge's Bakken Expansion Program will involve U.S. projects, which will be undertaken by EEP at a cost of approximately US$370 million; and Canadian projects, which will be undertaken by EIF at a cost of approximately C$190 million. The expansion program will originate at Beaver Lodge, ND, in the heart of the Bakken, and will follow existing EEP and EIF rights-of-way to terminate at and deliver to the Enbridge mainline terminal at Cromer, MB.