Enbridge plots new U.S. oil line; profit dips

Fri Feb 15, 2013 11:22am EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Enbridge Inc (ENB.TO: Quote) said on Friday it is teaming up with Dallas-based Energy Transfer Partners (ETP.N: Quote) in the latest conversion of a natural gas pipeline to oil use, a $3.4 billion project to move large volumes of Canadian crude to Louisiana refineries.

Calgary-based Enbridge, which also reported an 8 percent dip in fourth-quarter profit, said the conversion should help reduce the deep discount on heavy Canadian crude that has pressured producer profits and the economies of Alberta and Canada.

That wide spread between the price of Alberta's oil sands-derived crude and U.S. benchmark light oil is due to growing production and limited capacity to move the crude to markets.

Under the plan, the companies would ship 420,000-660,000 barrels a day of Canadian and North Dakota oil to St. James, Louisiana, from Enbridge's pipeline network in southern Illinois. That system is undergoing C$15 billion ($15 billion)worth of expansions.

"We're taking advantage of existing pipe in the ground, so not only are we minimizing the environmental footprint, but we can get it flowing to market sooner -- that's very important in terms of the price disparities we're talking about -- and at a lower cost than a new build," Enbridge Chief Executive Al Monaco said in a conference call.

The project would extend about 700 miles and could be in service by 2015, pending U.S. regulatory approvals.

Rival TransCanada Corp (TRP.TO: Quote) converted a stretch of Canadian natural gas line to oil use for its initial Keystone pipeline to the U.S. Midcontinent from Alberta, which started in 2010. It is planning a similar project for a new oil route to Quebec and Eastern Canada.

Enbridge has already expanded access to the western U.S. Gulf refining region by reversing the flow direction, then expanding, the Seaway pipeline between Cushing, Oklahoma, and the Houston area, in partnership with Enterprise Products Partners (EPD.N: Quote).   Continued...

The Enbridge Tower is pictured on Jasper Avenue in Edmonton August 4, 2012. REUTERS/Dan Riedlhuber