(By Mani) The focus of attention on oil production lends itself to a discussion of production growth and pipeline additions in the Bakken, Permian, Eagle Ford, Cushing/Gulf Coast, and Niobrara/Wattenberg in the US and the Western Canada Sedimentary Basin in Alberta.
A rough cut of the capital to be invested in new oil pipelines in 2013 is $4.2 billion in the Bakken; $2.75 billion in the Eagle Ford; $2.7 billion in the Permian; $1.65 billion in Canada; $1.45 billion in the Cushing to Gulf Coast region and $350 million in the Niobrara/Wattenberg.
It is important to note that virtually all of these projects are commercially committed under longer term contracts that secure 70-80 percent and more of the volumes and returns for the midstream companies that are building the infrastructure.
"From the perspective of risk related to volatility of commodity prices, we worry about the 10% of the time that oil prices are so high that they threaten demand and the 10% of the time that oil prices are so low that they threaten supply," Deutsche Bank analyst Curt Launer wrote in a note to clients.
"Given the tests on each side of this equation that occurred in 2008 and again in 2012, we believe that the growth in infrastructure that supports an overall favorable thesis for the Natural Gas and MLP sectors is enhanced by the evolution of the North American Oil market," Launer said.
In 2013, companies are expected to spend $30 billion on infrastructure, including $14 billion for oil, $7.5 billion for natural gas and $5 billion for natural gas liquids. This is a record level of spending for the industry overall and for oil in particular. The oil projects are concentrated among relatively few companies, a few basins and a few market areas.
Following companies could benefit from the various trends in the oil industry.
Bakken: Enbridge, Inc. (NYSE: ENB) (TSE: ENB)
Eagle Ford: Plains All American Pipeline, L.P. (NYSE: PAA); Kinder Morgan Energy Partners, L.P. (NYSE: KMP); Magellan Midstream Partners LP (NYSE: MMP)
Permian: Enterprise Products Partners L.P. (NYSE: EPD); Magellan Midstream; Plains All American; Energy Transfer Partners LP (NYSE: ETP)
Meanwhile, SemGroup (NYSE: SEMG) is expected to benefit from the activity in the Niobrara/Wattenberg while Enbridge, Kinder Morgan and TransCanada Corp. (NYSE: TRP) (TSE:TRP) would reap goods in Canada.
"We would point to the Cushing Storage market and the Cushing to Gulf Coast transportation market as poised for growth and upside. The largest capacity holders at Cushing include Rose Rock Midstream (NYSE: RRMS) along with MMP, PAA, ENB, and EPD," Launer noted.
Additionally, the proliferation of lighter oil barrels moving to the US East Coast and the refining capacity beneficiaries in the East Coast and Midwest of the US suggest upside for Buckeye Partners LP (NYSE: BPL)
and Kinder Morgan as the owners of terminal and storage capacity in the region.