January 16, 2015 / 4:58 PM / 4 years ago

Higher volumes of Canadian oil flowing to U.S. Gulf Coast

FREEPORT, Texas, Jan 16 (Reuters) - A pair of pipelines is ramping up to do what the controversial Keystone XL oil pipeline hasn’t yet been able to accomplish - sharply increase flows of Canadian heavy crude to the U.S. Gulf Coast.

Enbridge Inc’s Illinois-to-Oklahoma Flanagan South, coupled with Enterprise Products Partners’ Oklahoma-to-Texas Seaway Twin will deliver their first large-volume shipments to the largest refinery market in the United States, most of which is built to handle viscous oil like that produced in Canada.

“We are connected all the way from Canada to Houston, Texas City, Beaumont and Port Arthur,” Jim Teague, chief operating officer of Enterprise, which operates the 850,000 bpd Seaway system, said Friday near the end of the line on the coast, where a new marine terminal may double as an export platform.

Unlike Keystone, the Flanagan South-Seaway Twin combination bypassed the need for U.S. federal approval, as neither crosses the Canadian border. The existing Mainline system already feeds Flanagan South.

This week, the U.S. Senate advanced a bill to approve TransCanada Corp’s project as Republicans seek to secure enough votes to overcome a possible veto by President Barack Obama, who has been considering the project for six years.

But the flows from 600,000-barrels per day Flanagan South and 450,000-bpd Seaway Twin began in December, after some delays. The Twin parallels the original 400,000 bpd Seaway line, which moves both heavy and light crude to the Gulf Coast from the U.S. crude futures hub in Cushing, Oklahoma.

The incoming Canadian could displace heavy imports from Venezuela, Mexico and even Saudi Arabia, threatening to further pressure crude prices, which have fallen by half since June on global oversupply.

Booming U.S. oil output has pushed out most Saudi light sweet oil in the Gulf Coast market. Canadian heavy, which trades at a discount to U.S. light, could deepen competition for heavies.

“This is the linchpin of our market access strategy,” said Enbridge Chief Executive Al Monaco. “We will compete against waterborne imports.”

Yet lower prices could mean pullbacks as Canadian production is more costly than in the United States. Canada’s Suncor Energy has said it would cut 1,000 workers and slash $837 million in spending. (Editing by Terry Wade and Bernadette Baum)

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