July 6, 2011 / 6:30 PM / in 6 years

Enbridge takes a new stab at West-East oil plan

CALGARY, Alberta (Reuters) - Enbridge Inc is in talks with refiners and Western Canadian oil producers about establishing new pipeline access to Eastern refineries in a revamp of a concept it floated three years ago, an executive said on Wednesday.

The idea is to ship light crude oil to refineries in Quebec and beyond, which pay higher crude costs due to the wide pricing spread between oil on the Atlantic Coast compared with Western Canadian supply, said Richard Bird, Enbridge’s chief financial officer.

“There’s upwards of a $15 differential between what you can land Western Canadian crude into Eastern Canada for versus what refiners have to pay for Brent-based crude,” Bird told Reuters after speaking to an investment conference.

“That’s got quite a bit of interest stimulated, so we’re in discussions with refiners, with producers, who would like to see that path put in place.”

Enbridge, best known as operator of the main export system for Canadian oil, can deliver crude to the region at a toll of about $6 a barrel, he said. Light crude at the glutted Cushing, Oklahoma, storage hub currently sells for about $96.50 a barrel, compared with around $113 for world benchmark Brent.

That price discrepancy has prompted numerous plans to open up new markets for Canadian crude, including access to Asia and additional capacity as far south as the U.S. Gulf Coast.

The plan would require a reversal of flow on Enbridge’s Line 9, which can move up to 240,000 barrels a day to Sarnia, Ontario, from Montreal.

The company had proposed a similar idea in 2008, the C$350 million ($360 million) Trailbreaker project, which would have meant shipping crude on Line 9 and a reversed Portland-Montreal pipeline. At Portland, the crude would have been loaded onto tankers and shipped to the Gulf Coast.

“It’s really utilizing the same path and the same structure, although Trailbreaker was conceived largely a heavy line ... this is really a light crude solution that’s focused entirely on Eastern Canadian refineries,” Bird said.

There is no capital cost estimate yet for the plan, which would have a capacity of up to 250,000 barrels a day, he said.

Enbridge is also among companies proposing new pipelines to the Gulf Coast from Cushing as a way to help drain the brimming storage tanks.

The company is in talks with shippers to build a pipeline called Monarch, which would move up to 350,000 barrels a day from the Cushing hub, but wants committed support before holding an open season to satisfy regulators.

“We would hope this summer to firm up those commitments and that would lead to an open season in the fall, but it remains to be seen whether we have shippers committed at that point or not,” Bird said.

Bird said there is likely enough demand for more than one pipeline to be built from Cushing.

Other pipelines under consideration are planned by a joint venture of Enterprise Product Partners and Energy Transfer Partners LP as well as TransCanada Corp as part of its $7 billion Keystone XL project.

($1=$0.97 Canadian)

Editing by Peter Galloway

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