Enbridge Inc. and partner companies have struck a $2 billion deal to acquire about one-third ownership in the Bakken Pipeline System that will transport crude oil from North Dakota to the Midwest and the Gulf Coast.
Calgary-based Enbridge will provide $1.5 billion (USD) to its affiliate Enbridge Energy Partners, which will acquire a 27.6 percent indirect interest in the pipeline system as part of a joint venture deal. Ohio-based Marathon Petroleum Corp. will pay $500 million for a 9.2 percent indirect stake in the system.
The Bakken system is expected to deliver more than 470,000 barrels per day (bpd) of crude. It will travel from the Bakken production areas in North Dakota to a point in Illinois southwest of Chicago and to Texas on the Gulf Coast.
In a deal announced Aug. 2, Enbridge Energy Partners LP and Marathon Petroleum formed a new joint venture that entered into an agreement to acquire a 49 percent equity interest in the holding company that owns 75 percent of the Bakken Pipeline System from an affiliate of Energy Transfer Partners LP and Sunoco Logistics Partners LP.
Under this arrangement, Enbridge Energy Partners and Marathon Petroleum will indirectly hold 75 percent and 25 percent, respectively, of the joint venture’s 49 percent interest in the holding company of Bakken Pipeline. The transaction is subject to certain conditions and is expected to be finalized in the third quarter 2016.
“This acquisition is an attractive opportunity to participate in a pipeline system that will transport crude oil from the prolific Bakken formation in North Dakota to markets in eastern PADD II and the U.S. Gulf Coast, providing another important link in our market access strategy that is driven by improving netbacks and access to the best markets for our customers,” said Enbridge Energy Partners president Mark Maki, who added that the projects also offer the potential “for expansion of the pipelines should customer demand warrant.”
The system consists of the Dakota Access Pipeline and the Energy Transfer Crude Oil Pipeline projects. Phillips 66 owns the other 25 percent in each pipeline project. Both the Dakota Access and Energy Transfer Crude Oil projects are backed by long-term contracts.
“The Bakken Pipeline System is a great example of how the right acquisition can support and bolster our liquids pipelines strategy, while also supporting our U.S. sponsored vehicle,” said Guy Jarvis, executive vice president of liquids pipelines and major projects at Enbridge, referring to Enbridge Energy Partners.
Jarvis added that the acquisition will improve “market access for customers” by providing a new path to the Gulf Coast via Enbridge’s mainline system and the recently completed Southern Access Extension that will connect to the Energy Transfer Crude Oil Pipeline at the Patoka Hub.
“This will provide our shippers the ultimate potential to reach the eastern [Gulf Coast], which has been a strategic priority for us,” Jarvis said.
Dakota Access is a new 30-in. diameter pipeline from the Bakken/Three Forks production area in North Dakota to market centers in Patoka, Illinois. The pipeline is expected to initially deliver more than 470,000 bpd of crude oil, but could be expanded to 570,000 bpd. The pipeline has six origin locations in North Dakota. The construction of terminals began in January 2016, mainline pipeline construction began in May 2016, and all major materials and equipment have been procured.
Energy Transfer Crude Oil Pipeline, formerly one of the Trunkline pipelines, is a converted natural gas pipeline from Patoka to the Sunoco Terminal in Nederland, Texas. The pipeline consists of 62 miles of new 30-in. diameter pipe, 686 miles of converted 30-in. diameter pipe and 40 miles of converted 24-in. diameter pipe. Construction of the new pipe began in April 2016. Both the pipe conversion and the pump stations are more than 90 percent complete.
Both Dakota Access and Energy Transfer Crude Oil projects are expected to be ready for service by the end of 2016.
Upon successful closing of the transaction, Enbridge Energy Partners and Marathon Petroleum plan to terminate their transportation services and joint venture agreements for the Sandpiper Pipeline Project. Enbridge continues to believe the Bakken region is a highly productive and attractive basin, which has significant crude oil supply growth potential that will require additional pipeline capacity in the future. The scope and timing of the Sandpiper Pipeline Project will be evaluated during the quarter to ensure that it is positioned to meet the growing need for pipeline capacity while offering customers competitive returns.
Additionally, in conjunction with a termination of the Sandpiper joint venture agreements with Marathon Petroleum, Enbridge will retain 100 percent ownership in its legacy North Dakota system.