Refiners shun new Canadian crude blend offer from Enbridge line

Tue Jan 10, 2017 7:04am EST
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By Nia Williams

CALGARY, Alberta (Reuters) - Enbridge Inc has approved a new stream of heavy Canadian crude for export on one of its major oil pipelines to the United States, according to four trading sources. The only problem? No one wants it.

Canada produces more heavy than light crude because of its vast oil sands projects in northern Alberta. Space on the Enbridge system for heavy barrels is in short supply, with congestion set to worsen as oil sands production grows.

Enbridge's plan to squeeze more heavy crude onto its pipelines by shipping the new grade is its latest attempt to resolve bottlenecks in the 2.85 million barrel per day (bpd) Mainline system, traders in Calgary said. The system ships the bulk of Canada's crude exports to the United States.

Limited pipeline capacity has lead to a glut of crude building up in storage in Alberta, widening the discount on Canadian producers' oil and has deterred some companies like Royal Dutch Shell and Statoil ASA from building oil sands projects altogether.

Since late last year shippers have had the option of shipping the new blend known as Canada Heavy Sweet (CHS) crude on Enbridge's Line 3, which can carry up to 390,000 bpd of primarily light crudes from Alberta, to Superior, Wisconsin, and is currently underutilized.

Some refiners had inquired about the new crude but so far nobody has bought any, one source at a Canadian oil logistics firm said.

Refiners are unsure about the quality of the CHS blend and also are concerned about how it would be impacted through commingling with other batches of different crude blends shipped on Line 3.

To buy it, refiners would need to see cheaper prices, he said.   Continued...

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