Enbridge, Enterprise to double Seaway oil pipeline

Tue Mar 27, 2012 5:23pm EDT
 
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CALGARY, Alberta (Reuters) - Enbridge Inc ENB.TO and Enterprise Products Partners LP EPD.N will more than double capacity of the Seaway Pipeline and expand another line from Illinois to ship more crude oil out of the glutted U.S. Midwest.

The companies said late on Monday they will invest more than $2 billion in expanding the U.S. pipeline network after securing sufficient customer commitments for shipping a growing surplus of crude in the U.S. Midwest to refiners along the Gulf Coast.

The projects, when completed by mid-2014, should help end the glut of landlocked U.S. crude that has driven the price of U.S. benchmark West Texas Intermediate crude below the price of European Brent crude by as much as $28 a barrel.

Fast-rising supplies of crude from Canada's oil sands and the U.S. state of North Dakota have inundated the U.S. Midwest, distorting global oil markets. The deep regional crude oil discount that has padded profits for Midwest refiners like Marathon MPC.N.

Along with a handful of other lines underway, including the southern leg of TransCanada Corp's TRP.TO Keystone XL, nearly 2 million barrels a day (bpd) of new pipeline capacity will ultimately be ready to ship inland crude south, according to Simmons & Co. analysts.

The expansion would add 450,000 barrels per day (bpd) of capacity to the Seaway system, raising its capacity to 850,000 bpd by mid-2014, Enbridge said in a statement. The companies agreed to reverse the Seaway line last year, allowing it to pump crude from the Cushing, Oklahoma, oil hub to the Texas coast.

The company also plans to increase the size of its Flanagan South Pipeline from Flanagan, Illinois to Cushing to a diameter of 36 inches, from the originally planned 30-inch line. It will have an initial capacity of 585,000 bpd and can be expanded to 800,000 bpd with additional pumps to meet rising production from Canada's oil sands and North Dakota's Bakken field.

The estimated cost of the Flanagan line would increase to $2.8 billion from $1.9 billion. Enbridge's share of the cost of the Seaway pipeline twin line and extension is expected to be about $1 billion.

The companies will also extend the Seaway line from Houston, Texas, to the refining hub of Port Arthur/Beaumont.   Continued...

 
Pat Daniel, president and CEO of Enbridge, addresses shareholders during the company's annual general meeting in Calgary, Alberta, May 11, 2011. REUTERS/Todd Korol