Exclusive: Enbridge first to confirm re-exports of Canadian crude via U.S.

Sat Apr 5, 2014 12:37am EDT
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By Selam Gebrekidan and Nia Williams

NEW YORK (Reuters) - Enbridge Inc (ENB.TO: Quote) has become the first company to confirm plans to re-export Canadian oil from the United States, a move that could fuel debate over U.S. trade policy and intensify opposition to new oil sands pipelines.

Its U.S. subsidiary Tidal Energy Marketing has received a U.S. government license to export "limited quantities" of Canadian-origin oil from a U.S. port, Enbridge said, confirming weeks of market rumors and speculation about such shipments. Market sources say they expect the first 40,000-tonne cargoes to set sail from Texas ports to Europe later in April.

Re-exports from the United States are rare but allowed as an exception to a contentious ban on exports of its own oil imposed since the Arab oil embargo of the 1970s.

Enbridge plans to export "less than 1.5 percent" of its total U.S. shipments, Terri Larson, an Enbridge spokeswoman, told Reuters in an email. That would come to under 36,000 barrels per day (bpd) of the pipeline giant's 2.4 million bpd system, a tiny amount of oil in global terms but a volume that may grow amid rising North American production.

Larson declined to provide specifics on the port of departure, the destination or the type and volume of oil involved, saying this is commercially sensitive information.

Reuters reported earlier this year that the U.S. government granted a number of licenses to re-export foreign crude to Europe. But Enbridge, which operates one of only two major pipelines that can carry Canadian crude south to the U.S. Gulf Coast, was the first firm to publicly confirm it holds a re-export permit and intends to use it.

Late on Friday, leading U.S. independent refiner Valero Energy Corp (VLO.N: Quote) also confirmed that it had received a license last month to re-export Canadian crude, likely destined for its Jean Gaulin refinery in Quebec, whose rail shipments were blocked by severe weather.

"The license also allows us to export to the U.K., but the economics of that aren't good right now. The primary aim is to make sure the Quebec refinery is well-supplied with North American crude," company spokesman Bill Day said.   Continued...

Enbridge President and CEO Al Monaco speaks during the IHS CERAWeek energy conference in Houston March 6, 2013. REUTERS/Richard Carson