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After offering an extension to attract more commitments, Enterprise decides not to move ahead on project

In a two sentence release from the company today, Enterprise Products Partners (ticker: EPD) announced that it would not be moving forward with its proposed Bakken-to-Cushing crude oil pipeline.

The project was initially announced September 4 of this year by the company, which said it would start a binding open commitment period to determine shipper demand for capacity on the proposed pipeline. The project was slated to originate in the Williston Basin of North Dakota and also serve the Powder River and Denver-Julesburg (JD) Basins, said the company.

When the pipeline’s initial period for binding open commitments closed, the company released a statement saying that they would extend the deadline to November 14, 2014.

The 30-inch diameter pipeline would have run approximately 1,200 miles to Cushing hub in Oklahoma and was designed to have an initial capacity of approximately 340 MBOPD, expandable to more than 700 MBOPD. The pipeline was planned to be capable of transporting up to six grades of crude oil and products, including Rockies Condensate and Processed Condensate.

When it was first announced in September, A.J. Teague, executive vice president and COO of Enterprise said that “[the] pipeline offers a reliable, safe, and economical solution that promotes continued development of some of our nation’s most prolific producing areas and reduces the need for imports of crude oil.”

Not the first to fall

Teague told analysts in October, when oil prices slipped to $80 from $90 a barrel, that such prices “aren’t going to help that project,” but falling oil prices might not have been the only reason for Enterprise’s decision not to go ahead with its pipeline.

Other Bakken pipeline projects have been dropped when prices were higher, reports Reuters. ONEOK Inc. (ticker: OKE) decided to shelve its Bakken-to-Cushing pipeline in 2012, and Koch Pipeline Co. LP dumped plans for a Bakken-to-Illinois pipeline the following year.

Enterprise also had competition from other Bakken pipeline projects. Crude traders said Friday that fewer tariffs, better destinations and more options from other projects could be more of a factor in Enterprise’s decision than lower oil prices.

Both Energy Transfer Partners (ticker: ETP) and Enbridge Inc (ticker: ENB) have plans for their own Bakken pipelines. ETP’s North Dakota-to-Illinois pipeline, with a capacity of 450 MBOPD and project cost of $5 billion, is set to start up late 2016 with Phillips 66 (ticker: PSX) as a 25% partner. ENB’s North Dakota-to-Minnesota and Wisconsin pipeline, with a capacity of 225 MBOPD from North Dakota to Minnesota, then 375 MBOPD from Minnesota to Wisconsin and a project cost of $2.6 billion, is expected to go online in 2017, pending an environmental review in Minnesota.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.