Fitting into the World Market

By The Bakken Magazine Staff | June 24, 2013

The North American hydrocarbon revolution is happening, according to the International Energy Agency, and supply growth is occurring faster than previously expected. The IEA recently released its annual, “Medium-Term Oil Market Report.” The report indicates that supply from shale oil resources, including the Bakken, will transform the market over the next five years. “A country that 150 years ago served as the cradle of the oil industry, but which for decades seemed to face an irreversible production decline, now finds itself, all of a sudden, at the center of an oil boom,” Maria van der Hoeven, IEA executive director said. 

The increase in U.S.-based oil supply to the world markets, however, isn’t the entire story. The IEA recognizes several factors that will influence the impact of more oil in the market, including: crude quality, infrastructure requirements, current regulations and the potential for technology used in plays like the Bakken to be used in other plays around the world. “Altogether, these factors are forcing a series of chain reactions that will leave very few links in the global oil supply chain unaffected,” van der Hoeven said. 

According to van der Hoeven, the supply shock created by the surge in supply, should help to ease the market and reduce the effect of political- or infrastructure-based disruptions that influence the price of a barrel of oil, companies will begin to rethink their strategies and although emerging economies could become the leaders in refining capacity or overall oil demand, not everyone will be a winner. 

Another effect of North American-based oil production is the decline in imported oil for the U.S. Increased production and refining capacity in the U.S., however, hinges on the development of necessary infrastructure, the IEA believes. Without it, bottlenecks could pressure prices lower and slow development. 

Infrastructure Trends
For the Bakken, infrastructure development is only increasing, and project expansions continue to be announced before initial projects are even completed. Recently, Paradigm Midstream announced it would build and operate a pipeline system that will tie into an oil-based rail terminal and oil storage facility still under development by Dakota Plains Holdings Inc. Dakota Plains Holdings Inc. has also said it will add storage capacity and other services to the facility in the future. Summit Midstream Partners has expanded an existing hub terminal near Epping, N.D. The company has opened a 50,000 bopd crude gathering system that connects into the COLT Hub terminal. A Cromer, Manitoba oil storage and rail loading facility that can currently handle 30,000 bopd, is already planning to expand to 60,000 bopd, according to Tundra Energy Marketing Ltd., the facility’s owner. WBI Energy Inc. has announced plans to build a natural gas pipeline from western North Dakota to western Minnesota.

And, in what appears to be a trend in infrastructure development in the Bakken, the company has already said it could expand the proposed 400 million cubic-foot-per-day natural gas line to a 500 million cfd line in the future.