Kinder Morgan (KMI) plans to convert the Double H crude oil pipeline out of the Bakken to NGL service. The project is a shot across the bow of ONEOK (OKE) and could tip a delicate balance in the Bakken for crude oil and NGLs, according to East Daley’s regional models.
KMI announced the pipeline project in its 2Q24 earnings. Double H runs 462 miles from Dore, ND to the Guernsey market in Wyoming. The conversion will begin service in 1Q26, KMI said, allowing time for other infrastructure to bring the Bakken back into balance.
Pipeline egress from the Williston Basin is tight, and disruptions to one commodity market can create imbalances for others. While the Double H conversion adds capacity for NGLs, it will constrain crude oil flow to Guernsey, providing a big opportunity for other pipe expansions.
NGL infrastructure is the most pressing concern for now. Constraints on the NGL side of the business are prompting operators to blend more butane into Bakken crude, according to sources. ONEOK, the dominant NGL service provider in the Bakken, plans to start a 100 Mb/d expansion of Elk Creek Pipeline in 1Q25 that will open new egress and resolve the issue (see figure from the NGL Hub Model). However, the Elk Creek project only furthers OKE’s role as the top dog for Bakken NGLs.
The Double H project creates not only egress, but new competition for ONEOK in the NGL space. KMI is positioning itself as an alternative for producers, a move that could potentially enhance the competitiveness of Bakken supply in NGL markets.
On the crude oil side, the KMI project will take away an option for Bakken barrels to reach the Cushing market. True Companies’ Bridger and KMI’s Double H currently transport Bakken barrels to Guernsey. From Guernsey, the Saddlehorn and Pony Express pipelines provide favorable netbacks to ship crude to Cushing.
Once Double H converts to NGL service, the Bakken-to-Guernsey corridor becomes immediately constrained, according to EDA’s Crude Hub Model. Bridger Pipelines picks up a portion of Double H’s volume and fills to capacity, and shippers divert other crude oil to Dakota Access Pipeline (DAPL) and secondary markets. These secondary markets include shipping by rail or using Enbridge’s (ENB) Bakken North Pipeline to move barrels into Canada and then south into the Midwest (PADD 2). Both are relatively expensive options, and we would expect to see downward pressure on Bakken crude prices if shippers lean on them.
In addition to the challenge to OKE, the loss of capacity to Guernsey could open new opportunities for other pipeline expansions to restore the balance for Bakken crude markets. – Kristine Oleszek Tickers: ENB, KMI, OKE.
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