(Adds comments from CEO, impact on Canadian grades, paragraphs 2-8)
By Catherine Ngai
July 9 (Reuters) - Construction of the 600,000-barrel-per-day Flanagan South oil pipeline from Illinois to Oklahoma will be complete late in the third quarter, with the first oil flowing early in the fourth quarter, operator Enbridge Inc said.
The new timeline for commissioning the nearly 600-mile conduit is later than the company’s prior third-quarter in-service date, delaying delivery of another large slug of Canadian crude to refiners along the U.S. Gulf Coast. The arrival of that heavy oil is expected to further cut into imports from supplies like Mexico and Venezuela.
Late on Tuesday, a company spokeswoman said in an e-mail that most construction for the 593-mile pipeline is complete and that work continues on the seven pump stations. She added that construction will be completed late in the third quarter and line fill would begin in October or early in the fourth quarter.
Speaking after a presentation to an energy conference in Calgary on Wednesday, Enbridge’s chief executive officer Al Monaco said line fill could technically begin prior to Flanagan’s mechanical completion by late in the third quarter. He added that line fill would take around three weeks.
Flanagan South will connect Enbridge’s main Canadian export pipeline to Cushing, Oklahoma, where the oil is expected to flow into the expanded Seaway pipeline to the Gulf.
The line will not initially run at full rates. The pipeline “was never intended to start at full capacity on Day 1” but commitments would “ramp up,” Monaco added.
“We don’t see any disparity between our upstream capacity and our ability to meet our Flanagan South demands,” he said.
The delay in start-up threatens to put pressure on price differentials for Canadian sour crudes, including Western Canada Select and Cold Lake. WCS for August delivery slid to trade at a $23 discount to WTI earlier on Wednesday, down from $21.60 a barrel on Tuesday, according to Shorcan Energy brokers.
In May, Enbridge executives said the Flanagan Line south was on target to go into service in the third quarter. They also suggested there was potential scope to further expand the system, as well as Seaway, by several hundred thousand bpd.
The apparent delay in Flanagan may not surprise some traders, who had grown skeptical over how quickly it would come into service. Enterprise Products Partners LP, which co-owns the Seaway line, announced last week that the expanded segment was mechanically complete but would be commissioned during this quarter, also later than anticipated. (Reporting by Catherine Ngai in Calgary, additional reporting from Nia Williams and Scott Haggett in Calgary; Editing by Jessica Resnick-Ault, Lisa Von Ahn and David Gregorio)