More than $22 billion will be spent to build over 23,000 miles of pipeline in North America between 2014 and 2020, according to a recently updated pipeline construction report.
The third-quarter 2013 update of the North American Onshore Pipeline Database Service, by Douglas-Westwood, an energy research group based in Faversham, England, also catalogued the planned construction of over 1,000 miles of pipelines transporting Permian crude oil from the Bakken Shale region.
The Bakken pipelines will enable Bakken Shale oil and gas companies to meet the logistical challenges of transporting crude oil from the remote shale region, which encompasses parts of the United States, including North Dakota and Montana, and Canada.
Because of North Dakota’s short construction season, hard terrain, and distance from the Gulf Coast, rail transportation and natural gas flaring by Bakken Shale oil and gas companies has boomed in recent years. However, the report estimates that the planned Bakken pipelines will further lower the current Bakken discount compared to WTI, which has hovered around $5 for most of 2013, and diminish the cost competitiveness of rail.
“While the capital cost of pipeline installation can sometimes be difficult to justify when compared to rail, a pipeline cathodic protection system can help companies control associated maintenance and repair costs,” said Jeff Didas, who works as a pipelines practice lead for MATCOR, a Pennsylvania-based cathodic protection management company.
“When the potentially devastating effects of corrosion are managed to the point that corrosion becomes a minor factor, pipelines transform into a far more cost effective option over the 30-plus year commitments typically required in pipeline shipping contracts,” Didas said. “A cathodic protection strategy for pipelines is vital for Bakken Shale oil and gas companies and others who are investing in takeaway infrastructures from shale plays in North America.”
One such area, the Utica Shale, has lagged in production to date compared to other major shale plays but is expected to spike soon, due in part to pending developments in pipeline construction and capacity.
“Shale-Driven Pipeline Expenditure to Hit $22B Before 2020,” Oil & Gas Financial Journal, December 12, 2013.