Enbridge, shippers at odds over "air barrel" relief

Fri Nov 23, 2012 3:23pm EST
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* Change aimed at cutting over-booking of pipeline space

* Some shippers say plan reduces transparency

* Tight pipe space cited for deep Canadian oil discounts

By Jeffrey Jones

CALGARY, Alberta, Nov 23 (Reuters) - Enbridge Inc and its crude oil pipeline customers are battling over a plan by the company to try to cut the over-booking of capacity on the massive export network that has played a role in the deep discounting of Canadian crude prices.

The dispute is the latest symptom of an oil pipeline network running ever closer to capacity as production from the Canadian oil sands and North Dakota Bakken surges and expansion plans get bogged down by regulatory delays and environmental opposition.

Under the proposal, which is taking flak from some of the world's largest oil companies, Enbridge wants to shift how it calculates the amount of crude its shippers can nominate on the pipelines each month to a new system based on the capacities of refineries, which it would verify itself.

Since Enbridge's devastating oil spill in Michigan in the summer of 2010, which shut a major line between Indiana and Sarnia, Ontario, for several months, shippers have based nominations on the highest monthly volume they have moved to refining facilities in the U.S. Midwest and Ontario over the previous two years. That system was expected to be temporary.

According to documents filed with the U.S. Federal Energy Regulatory Commission, Enbridge's change is aimed at eliminating "air barrels" -- industry slang for nominations above shippers' ability to move oil. It is a way of gaming the system so companies get as much crude as possible to refineries.   Continued...