Friday, December 16, 2016

COTW: Bakken Field Pipe (Dream)

The Dakota Access pipeline, which has suffered a perhaps temporary setback at the hands of "hostiles", does not make dollars and cents, and in the era of neo-facisism  that is the only bottom line.  Bakken field wells are already reaching their production peak [chart above].  Wells that produced 220bpd in 2005 are now producing only 20bpd. The usual formula that cheap transportation equals more production no longer holds true because nowadays global demand controls oil prices which in turn influence production levels.  It may be true that Bakken crude shipped by rail costs about $15 per barrel while transporting by pipeline costs about $8, that margin is a difference with substantial impact because it costs $5-15 million to spud a producing well into the tight shale of the Bakken. Only a global price increase could induce more production from an already declining field.  This chart shows that most domestic crude supply is shipped by rail:

source: EIA
North Dakota is now the second largest producer of oil in the US, producing about one of every eight barrels of crude [chart below], and nearly 60 to 70% of that has been shipped by rail.

source: EIA
So the Dakota Access pipeline is an expensive luxury not worth the environmental damage a rupture will cause.  Then why is it being built, you ask?  The answer is relatively simple: Energy Transfer Partners of which the Current Occupant-to-be is a shareholder, stands to gross $1.37 billion a year. .  CEO Kelcy Warren contributed more than $100,000 to install Trump in office.  So there you have it in dollars and cents.