Natural gas company proposes North Dakota-Oklahoma oil pipeline

BISMARCK, N.D. – A natural gas company on Monday announced a proposal to get into the crude oil business by building its own 1,300-mile oil pipeline from North Dakota to the nation's biggest storage terminal in central Oklahoma.

Tulsa, Okla.-based Oneok Partners LP said the proposed Bakken Crude Express Pipeline would cost between $1.5 billion and $1.8 billion and have the capacity to move 200,000 barrels of crude daily from the heart of North Dakota's rich oil patch to the hub in Cushing, Okla.

Oneok's plan brings to six the number of pipeline projects proposed to help ship crude out of the rich Bakken shale and Three Forks-Sanish oil reservoirs in the western North Dakota, said Justin Kringstad, director of the North Dakota Pipeline Authority.

Which projects becomes a reality will depend on which get commitments from suppliers. Oneok spokesman Brad Borror said his company is negotiating commitments that could put it on track to begin construction next year and complete a pipeline by 2015.

Kringstad called Oneok's proposal "very substantial" but said the market will determine if any of the proposed pipelines are built.

"Ultimately, it will be up to the industry to decide which of the various projects it wants to support," Kringstad said.

North Dakota is the nation's third-biggest oil producer and is expected to trail only Texas in crude output within the next year. The state's burgeoning oil production is outpacing the ability to efficiently move the product to market, causing drillers to take deep price cuts. Shippers increasingly are using trains to get crude out of North Dakota, with rail shipments accounting for about a quarter of the more than 546,000 barrels produced daily in the state, Kringstad said.

Kringstad said of the five other proposed pipeline projects, which have a collective shipping capacity of 700,000 barrels a day, only TransCanada Corp.'s $7 billion Keystone XL project has firm shipping commitments. It also is the only one that needs federal approval because it is the only one that would cross the U.S.-Canada border, Kringstad said.

The bulk of the Canada-to-Texas pipeline, which would carry Canadian tar sands oil and 100,000 barrels of crude daily from North Dakota and Montana, is on hold after President Obama temporarily halted it in January. But Obama last month directed federal agencies to expedite the project's southern leg, from Oklahoma to the Gulf Coast, to help eliminate an inventory glut in Cushing partly due to increased production in North Dakota.

Oneok already is North Dakota's biggest gatherer of natural gas, with more than 3,500 miles of pipelines in the state. Oneok also has nearly $2 billion in projects planned to ship and process natural gas and natural gas liquids from western North Dakota to Midwest and Rocky Mountain markets, Borror said.

Eighty percent of the proposed oil pipeline's path would follow Oneok's existing or planned natural gas pipeline routes, Borror said.
"We are currently working with producers of natural gas and natural gas liquids so this would allow us to be a full-service provider," Borror said.