April 9, 2012 / 2:45 PM / 7 years ago

UPDATE 2-Oneok plans new Bakken-Cushing oil pipeline

* Pipeline to run from Williston Basin to Cushing

* 200,000 bpd capacity could be expanded

* Line to cost up to $1.8 billion, to be completed by 2015

By Janet McGurty

NEW YORK, April 9 (Reuters) - Oneok Partners LP plans to build a 200,000 barrel-per-day (bpd) pipeline to deliver crude from North Dakota’s rapidly expanding Bakken region to the Cushing, Oklahoma, oil market hub, its first foray into crude transportation.

The natural gas storage and transport company plans to invest $1.5 billion to $1.8 billion to build the 1,300 mile Bakken Crude Express Pipeline, which will be completed by 2015 and carry high quality light-sweet crude oil produced from tight oil deposits in North Dakota’s Williston Basin, the company said in a statement on Monday.

Crude oil production from Bakken and other shale oil formations in the United States has surged over the past two years, redefining crude markets and creating a scramble to build infrastructure to get supplies to refining hubs, especially the U.S. Gulf Coast.

The Bakken Crude Express Pipeline will run parallel to a natural gas liquids pipeline already under construction that will run from the Williston Basin in Montana to Colorado. The oil line will then run next to the Overland Pass Pipeline, in which Oneok has a 50 percent interest, from Colorado to Oklahoma.

“This proposed pipeline will provide producers with efficient and reliable transportation of their product directly to one of the largest crude-oil market hubs in the U.S.,” said Terry K. Spencer, ONEOK Partners president, in the statement.

“Many of the supply commitments under negotiation are with the same producers in the Williston Basin that we currently serve.”

Oneok said capacity on the new oil pipeline could be increased based on the supply commitments prior to construction. A spokeswoman for the company said that it has yet to announce the open season to gauge the interest of shippers using the line and that Oneok did not anticipate any right of way issues since the proposed crude line will trace the route of existing or approved pipelines.

The North Dakota shale growth, along with rising flows of oil from Canada to the Midwest, has created a boom for companies seeking ways to move crude from production regions to the U.S. Gulf Coast, home to roughly half of U.S. refining capacity. Analysts have said that unless new capacity to ship oil produced from the regions is constructed, it could create a supply bottleneck, weighing on prices.

Companies are racing to build capacity to move crude from Cushing, the delivery point for the New York Mercantile Exchange’s oil futures contract, to the Gulf Coast to help alleviate a glut of crude building up in the Midwest.

A reversal of Enterprise Products Partners Seaway pipeline to take crude from Cushing to the coast at the end of May is the first major step toward alleviating the Midwest glut. Crude sold into the Gulf Coast fetches a hefty premium to oil sold at Cushing.

North Dakota’s oil output in January surged to 546,000 bpd, up nearly 60 percent from the previous year, pushing it ahead of California to become the third-largest oil producing state behind Texas and Alaska.

Last week, Oneok announced plans to build a pipeline in North Dakota to carry natural gas produced in the Bakken to a gathering network in Williams county as part of efforts to monetize gas produced from oil wells instead of just flaring it.

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