August 23, 2010 / 8:04 PM / in 7 years

Outage forces Enbridge to ration oil pipeline space

CALGARY, Alberta (Reuters) - The outage of an Enbridge Inc pipeline after last month’s rupture and oil spill in Michigan has forced the company to limit the volumes its shippers had planned to move on two other major lines in its U.S. system, the company said on Monday.

The imposition of space rationing, or apportionment, for oil volumes set for shipment in September further complicates affairs for heavy oil producers in Western Canada and refiners in the U.S. upper Midwest and southern Ontario, which have struggled with the situation for four weeks.

Enbridge, whose pipelines ship the bulk of Canada’s oil exports to the United States, is cutting back shippers’ nominations on Line 5, a 490,000 barrel a day pipeline to Sarnia, Ontario, from Superior, Wisconsin, by 26 percent.

It is also apportioning Southern Access, a 400,000 bpd line to Flanagan, Illinois, from Superior, that is also known as Line 61, by 23 percent, spokeswoman Gina Jordan said.

Enbridge reduced overall volumes on Line 5 by 8 percent earlier in August, but did not impose apportionment. The rationing for September does not mean further overall reductions in oil flows on the two lines.

The squeeze on nominations represents the latest headache stemming from the July 26 rupture of Line 6B near Marshall, Michigan, which spilled 19,500 barrels of heavy Canadian crude into the Kalamazoo River system and prompted a cleanup effort involving about 1,500 people.

Enbridge is still awaiting approval from an arm of the U.S. Department of Transportation so it can perform pressure testing on locations apart from the spill site, as well as a ruling on its plan to restart the 190,000 bpd pipeline, Jordan said.

The regulator rejected Enbridge’s initial plan and ordered it to perform more testing on Line 6B.

Refineries served by that pipeline in Ohio, Michigan, Pennsylvania and Ontario have been forced to scramble for alternative supplies as the conduit remains off line. At least three in the Midwest have cut production.

The situation has bolstered demand among Canadian refiners for crude from the North Sea, which has helped support prices there, traders said.

Meanwhile, the discount on Canadian heavy crude compared with benchmark light oil has widened sharply in recent weeks as the summer driving and asphalt paving seasons have approached their end and major oil sands producers, including Syncrude Canada Ltd and Suncor Energy Inc, prepared for September maintenance at their upgrading plants.

The latest development stands to pressure price spreads more, said Martin King, an analyst with FirstEnergy Capital Corp.

“Things are going to say wide here -- as wide or even a little bit wider. It’s not a pretty sight for the heavy oil guys, but what are you going to do?” King said.

Reporting by Jeffrey Jones; editing by Peter Galloway

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