Faced with a loss of Canadian barrels, Capline Pipeline is looking to expand its rolodex in the Bakken. The pipeline could become a supplier of light sweet crude oil to the St. James hub, thanks to new market dynamics created by the Trans Mountain Pipeline expansion (TMX).
Operated by MPLX, Capline historically has delivered Canadian heavy oil sands crude from Patoka, IL to St. James on the Louisiana Gulf Coast. The pipeline recently held an open season to attract light sweet barrels to the system. As the Bakken continues to grow, Capline is positioned to move some of that supply growth to St. James.
TMX came online in May 2024 and can take 590 Mb/d of heavy Canadian crude from Edmonton, AB to the Vancouver port for export. The expansion enables shippers in Canada to divert heavy barrels from Enbridge’s (ENB) Mainline feeding both Trans Mountain and Capline.
East Daley Analytics expects Capline will lose barrels in 2H24 and 2025 compared to activity prior to TMX start-up. According to the latest Crude Hub Model, throughput on Capline declines by 70 Mb/d by YE24 vs the 5-month average through May ’24, just prior to TMX start-up.
Capline must compete against other routes for Bakken barrels to reach the St. James market, shown in the figure from the Crude Hub Model. Shippers on Capline pay $8.83/bbl to transport crude out of the Williston Basin to Patoka and then to St. James. The alternative Dakota Access Pipeline (DAPL) moves Bakken oil to ETCOP pipeline, then to Bayou Bridge Pipeline running from Nederland, TX to St. James. That route currently costs $11.55/bbl for shippers.
Zydeco Pipeline is another option to move a similar-grade Permian barrel to St. James. Zydeco runs from Houston to St. James and has a current tariff rate of $10.05/bbl. Capline is the most cost-effective option for the light sweet barrel for shippers. Capline also currently has incentive rates for both light and heavy barrels.
Bakken growth should create opportunities for Capline. Using EDA’s Production Scenario Tools, we forecast Bakken crude oil production to grow by 5% in 2024 and 8% in 2025, creating more demand for transport services. – Haley Vinton Tickers: ENB, MPLX.
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