In seemingly the time it took for the paint sprayed by an angry Green Party presidential candidate to dry, Enbridge Inc. transformed both its corporate structure and its strategy involving a major shale play in two huge moves this summer.

As bold steps forward go, the $28 billion acquisition of Spec- tra Energy Corp. is one to paste into the boardroom scrapbook, but by abandoning the Sandpiper Pipeline Project in favor of a joint investment with Marathon Petroleum Corp. into the Bak- ken Pipeline System, which includes the Dakota Access Pipeline (DAPL), Enbridge has engineered a profound shift in the region.

Analysts from East Daley Capital Advisors Inc. told Midstream Business that backing DAPL and essentially killing the $2.6 billion Sandpiper (the project has been delayed for five years) could help bring about a supply-and-demand balance in the Bakken Shale by 2020.

“The [Bakken Pipeline System] merger is a sign of a well-functioning market,” said Justin Carlson, vice president and managing director for research at East Daley.

The balance won’t come about yet, though. With Dakota Access scheduled to begin operations by year-end 2016, pipeline capacity in the Bakken will exceed the play’s output, said Matt Lewis, East Daley’s director of equity research. Government inter- vention has threatened to delay the project.

Not all production will move into pipelines, because many producers are still locked into contracts to move their crude by rail, Lewis said. However, between now and the expected sup- ply-and-demand equilibrium in 2019-2020, midstream operators will be, for the most part, protected by take-or-pay contracts.

For Bakken producers struggling with low oil prices, the new pipeline should help.

Comments