Another turf war is shaping up between Canadian pipeline giants TransCanada and Enbridge as they try to take a dominant role in shipping crude from the Bakken formation, which straddles the border between Saskatchewan and North Dakota-Montana.
TransCanada said it secured long-term contracts for 65,000 barrels per day during an open season for a planned 100,000 bpd, US$140 million pipeline connection from Baker, Mont., to Cushing, Okla., where it would feed into TransCanada’s proposed 500,000 bpd Keystone XL pipeline, which is waiting for a decision from the U.S. State Department.
The new contracts increase commitment capacity on Keystone XL to 75 percent from 50 percent, which TransCanada hopes will blunt some of the stern opposition to the 500,000 bpd project from Cushing to the U.S. Gulf Coast.
TransCanada Senior Vice President Paul Miller said that moving U.S. production to U.S. markets is evidence of a direct benefit to the United States and might help overcome resistance to Keystone.
Enbridge, meanwhile, has held its own open season to test support for a C$543 million proposal to pump an extra 145,000 bpd into its existing 170,000 bpd Bakken pipeline system through Saskatchewan.
It has also recently raised capacity by 51,000 bpd to 161,000 bpd on its pipeline from North Dakota to Clearbrook, Minn.
Enbridge has proposed to open up transportation options for producers, including guaranteed access from North Dakota to its mainline system from Alberta to the U.S. Midwest and eastern Canada.
More oil from Bakken
The competition between the two is further proof that technology can squeeze more production from the Bakken rocks in a region once thought to have passed its best-before-date, but now yielding 350,000 bpd and expected to reach 500,000 bpd by 2020.
Williams Cos. has just paid US$925 million to acquire 85,000 acres of Bakken land and expects to spend US$360 million on drilling and development by the end of this year, adding to its 185 million barrels of oil equivalent of net reserve potential.
Marathon is targeting 22,000 boe per day of production over the next three years, up from its current 14,000 boe per day.
In Saskatchewan, Cenovus Energy, Crescent Point Energy, Enerplus Resources and PetroBakken are the dominant players in the Bakken, where output is close to 70,000 bpd, but foreign entities are edging into the picture, with Abu Dhabi’s Taqa North adding the Bakken to its varied Canadian portfolio and Australia’s Molopo Energy using the Bakken as a springboard towards its goal of acquiring 9.2 million barrels of reserves.
Resource could be 9 billion barrels
The U.S. Energy Information Administration recently estimated North Dakota’s shale oil formation has posted an 83 percent increase in its proved reserves over the past year to 480 million barrels.
The U.S. Geological Survey estimates the Bakken formation could hold as much as 4.3 billion barrels of recoverable oil, using new horizontal drilling and multi-stage fracturing technologies, although others believe the total could be 9 billion barrels once the emerging Three Forks-Sanish reservoir is included.
Further fueling interest, Calgary-based NuLoch Resources has agreed to an all-share takeover bid by Texas-based Magnum Hunter Resources valued at US$327 million, creating NGAS Resources, a cross-border player in the Williston basin, which covers portions of Saskatchewan, Montana, North Dakota and South Dakota and takes in the Bakken and Three Forks-Sanish plays.
Magnum Hunter, which started trading on the New York Stock Exchange 18 months ago, has focused exclusively on unconventional shale oil and gas in North Dakota, the Appalachians and Texas, currently producing 1,800 bpd, while NuLoch was formed from a spinoff in 2005 and produces 1,550 bpd from 72,000 acres straddling the Canada-U.S. border.
Victor Rodberg, an analyst with Clarus Securities, said the deal points to growing interest by Canadian and U.S. companies in prospects on both sides of the border. He wondered why companies such as Crescent Point or PetroBakken hadn’t already made a bid for NuLoch.
—Gary Park
