ONEOK Partners scraps Bakken oil pipeline plans

By ROD WALTON World Staff Writer

Published: 11/28/2012  1:56 AM

Last Modified: 11/28/2012  4:09 AM

Tulsa-based ONEOK Partners LP announced Tuesday it has decided not to build the Bakken Crude Express Pipeline from North Dakota to Oklahoma due to a lack of long-term commitments by oil producers to use the 1,300-mile conduit.

The $1.8 billion project was going to be natural gas-focused ONEOK Partner’s entry into the booming U.S. crude oil infrastructure market. The Williston Basin and Bakken Shale in North Dakota is considered the nation’s top domestic oil play.

“Despite the robust outlook for crude-oil supply growth in the Williston Basin in the Bakken Shale, we did not receive sufficient long-term commitments under the terms we needed to construct the Bakken Crude Express Pipeline,” said Terry K. Spencer, ONEOK Partners president. “While we are disappointed with the results of the open season, we remain committed to serving Williston Basin producers for their natural gas, natural gas liquids and crude-oil infrastructure needs.”

ONEOK Partners still has $4.2 billion to $4.8 billion in work under way in natural gas and natural gas liquids projects, Spencer added.

The Bakken Crude Express would have moved 200,000 barrels of oil per day from North Dakota and Montana wells to the giant storage hub in Cushing.

Plans to build the pipeline were announced in April. At the time, ONEOK Partners’ leadership was optimistic about filling the line by its completion in 2015.

“As producers continue to aggressively develop crude oil from wells in the Bakken Shale, more crude-oil pipeline takeaway capacity will be required,” Spencer said in April.

The pipeline would have paralleled some of the company’s other natural gas and NGL transportation assets.

The Bakken Crude Express hit a legal snag in September when Houston-based Barcas LLC sued ONEOK Partners over a deal to secure commitments for the line.

Barcas alleged that ONEOK Partners violated a multimillion-dollar agreement between the two parties reached earlier this year. The lawsuit alleged that Barcas started work contacting potential customers such as Samson, ConocoPhillips and Marathon, but ONEOK Partners sent its own people to secretly meet with those producers and cut Barcas out of the deal.

“OKS wrongfully planned to reap the benefits of Barcas’ agreed-upon services without having to pay Barcas the fees specified in the letter agreement,” the complaint stated.

OKS is ONEOK Partners’ ticker symbol on the New York Stock Exchange.

ONEOK Partners denied any wrongdoing.

Barcas is headed by Kevin Foxx, a former SemGroup LP executive and co-founder of that Tulsa midstream energy company. Foxx was a key figure in SemGroup’s rise and subsequent Chapter 11 bankruptcy in 2008, though the company emerged intact as SemGroup Corp. and is now under different leadership.

As a result of the decision to kill the pipeline, ONEOK Partners reduced its 2013 capital expenditure estimate by $400 million to $2.2 billion. The company previously projected net income increases of 20 percent to 25 percent annually through 2015, mostly through growth projects.

Original Print Headline: ONEOK scraps Bakken pipeline


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