Energy Transfer Partners, L.P.
) announced that its board of directors has approved the
construction of a 1,100 mile crude oil pipeline called the Bakken
Pipeline. This new pipeline will transfer crude oil from the
Bakken/Three Forks production area in North Dakota to Patoka, IL,
where the Bakken Pipeline will interconnect with Energy Transfer's
existing 30-inch diameter Trunkline Pipeline.
Successful Open Season
Constructing a crude oil pipeline involves huge initial capital
investment. So, the pipeline operators conduct an open season to
assess the demand for pipeline services. Energy Transfer, too,
through its open season was able to secure multiple long-term
binding contractual commitments for the new pipeline. These
commitments provide assurance to pipeline operators on return on
The 30-inch diameter Bakken Pipeline will initially transport
320,000 barrels per day of capacity with the provision of
increasing the capacity depending on customer demand.
Midwest Crude Production
Modern drilling technology has resulted in increased crude oil
production. North Dakota presently produces more than 1 million
barrels of crude oil per day. Crude oil production in this region
is expected to go up, further driving demand for pipeline services.
The new Bakken Pipeline is expected to start operation from end
2016, when the production of crude oil in North Dakota is expected
to expand by 40% to 50% from current levels.
Cost Effective Services
The Bakken Pipeline will provide a cost effective alternate method
to transport production from the region to the major U.S. markets.
This will reduce the dependence on rail and truck transportation.
The shippers will have the option from Patoka, IL to access the
Midwest and East Coast markets by rail. They can also avail the
Trunkline to reach the Nederland, TX crude oil terminalling
Sunoco Logistics Partners L.P.
Will the U.S. Lift Crude Oil Export Ban?
U.S. crude oil production has jumped manifold thanks to superior
exploration and production techniques. Reports are also rife that
the Obama administration might lift the ban on U.S. crude oil
exports completely. If the export ban is finally lifted it will
create greater demand for pipeline services.
Even if that is not the case, crude oil production in the U.S. is
expected to touch 9.3 million barrels per day in 2015, up 25.7%
from 2013 levels, as per the U.S. Energy Information
Administration. This boom in crude oil production is likely to
benefit the pipeline operators.
Energy Transfer Partners carries a Zacks Rank #2 (Buy). Investors
interested in the oil and gas pipeilne industry may also consider
Delek Logistics Partners, LP
TC PipeLines, LP
). Both these stocks carry a Zacks Rank #1 (Strong Buy).
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SUNOCO LOGISTIC (SXL): Free Stock Analysis
ENERGY TRAN PTR (ETP): Free Stock Analysis
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