October 1, 2015 / 10:36 PM / 2 years ago

Enbridge's Line 9 oil pipeline to displace foreign crude in Quebec

CALGARY, Alberta, Oct 1 (Reuters) - Enbridge Inc's long-awaited start of its Line 9 oil pipeline to Montreal will allow Quebec refineries to run on 100 percent cheap North American inland crude, leaving around 100,000 barrels per day of foreign crude searching for a new home.

The Calgary-based energy company received approval from regulators on Wednesday to finally start operating the 300,000 bpd pipeline carrying mainly light crude from Sarnia, Ontario, to Montreal, Quebec, nearly a year after it was first expected in service.

For Quebec's two refineries, Suncor Energy's 137,000 bpd Montreal plant and Valero Energy's 265,000 bpd Jean Gaulin facility, the approval is a welcome boon.

Both will be able to switch to a diet of 100 percent West Texas Intermediate-linked crude such as Canadian light synthetic or North Dakota Bakken, displacing pricier Brent-linked feedstock from regions including West Africa and the North Sea.

At present the refineries receive crude by rail, seaborne imports into Quebec, and volumes from the Portland-Montreal pipeline, which transports imported crude north.

Data from Statistics Canada show in July, the most recent month available, Quebec imported 113,000 bpd of crude from Azerbaijan, Algeria and Nigeria. Another 206,000 bpd came from the United States and Canada.

Total foreign crude imports into the province from outside North America vary from month-to month, according to the data, but range around the 100,000 bpd mark.

Other countries that have exported to Quebec so far this year include Norway, Russia, Angola and the United Kingdom.

"Once Line 9B is operational, the refinery will replace more-expensive crude with less-expensive crude," said Valero spokesman Bill Day.

A recent Valero investor presentation showed the refinery currently takes around 80 percent North American crude, with the rest imported from overseas.

Suncor did not specify how much overseas crude it processes but spokeswoman Sneh Seetal said some of the Brent-linked crude comes from Suncor's own offshore Atlantic Canada projects.

Analysts said Line 9's ability to deliver crude to Montreal will be a further blow to the struggling crude-by-rail industry.

Suncor has capability to receive 40,000 bpd by rail, while Valero has capacity to take 60,000 bpd, although the actual volumes vary depending on economics.

"Some of those railed barrels will be displaced by piped barrels because of cheaper transportation costs," said ITG Investment analyst Judith Dwarkin.

Dwarkin said Valero also imports barrels from the Gulf Coast, shipping them north on foreign-flagged vessels to Montreal, and those flows will likely be disrupted too. (Reporting by Nia Williams; Editing by Diane Craft)

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