Enbridge Alberta-Gulf pipeline shelved

Project would have moved Western Canadian crude to Gulf, reversed direction of flow; lacked support from potential shippers

Gary Park

For Petroleum News

Canadian pipeline company Enbridge has added to the postponement of oil sands-related projects by shelving indefinitely plans for a US$350 million scheme that would have moved Western Canadian crude to the U.S. Gulf Coast via tanker by mid-2010.

The Trailbreaker project offered 130,000 barrels per day of capacity to the Gulf through the Portland pipeline by reversing the flow from Montreal to Portland, Maine, as well as 70,000 bpd to Montreal refiners.

It had already failed to get backing from the Canadian Association of Petroleum Producers, which said it did not offer sufficiently attractive returns for producers.

CAPP said the project would be put on hold until shippers and CAPP renewed interest in the project.

In a letter to Enbridge filed with the National Energy Board, Montreal Pipe Line — which owns the Canadian segment of the existing 18-inch Portland-Montreal pipeline — said an open season which closed Dec. 30 did not generate the level of firm volume commitments from Canadian producers and U.S. and Canadian refiners required to proceed with the project at this time.

The letter said that although several prospective shippers showed strong interest in moving their crude for loading onto marine tankers and accessing new markets on the North American East Coast, the Gulf and possibly offshore they said the timing was not right for them to make shipping commitments.

It said the dramatic change in economic conditions over recent months and the outlook for supply and demand of Western Canadian crude is less certain.

The open season could be reopened along with related negotiations with shippers as soon as market conditions warrant, the letter said.

The Trailbreaker route, which was to have been operating by 2010, was designed as a temporary export route until such time as demand resumed for a 400,000 bpd overland pipeline from Alberta, once targeted for startup in 2012. But Enbridge said last summer it doubted there would be enough oil sands production to justify the line before 2014.

An Enbridge-BP partnership had proposed spending up to US$2 billion to expand existing pipelines and build new connections to deliver up to 250,000 bpd to refiners on the Gulf Coast.

In the midst of such general gloom, even small developments in the oil sands are warmly greeted.

Connacher resumes output

The junior producer said it expects to reach 9,000 bpd by the end of February because returns from extra-heavy crude have improved and should yield improved bitumen prices and netbacks during the next six months, with “further improvements possible as more normal commodity and capital markets re-emerge and the economic outlook brightens.”

Connacher had been the first notable oil sands producer to cut production when oil prices slipped below US$40 per barrel.

However, the company’s plans for a 10,000 bpd expansion remain on hold, other than completion of a plant site, well pad sites and the construction of key equipment.

It said a resumption of activity will need “a thaw in and improvement of capital markets and improvement in the general economic conditions in North America” – all factors it puts in the unknown category as far as timing is concerned.

Long Lake production begins

The main process units at the upgrader have successfully been brought on line and should allow full capacity of 60,000 bpd to be reached within 12 to 18 months, Nexen said.

Nexen Chief Executive Officer Marvin Romanow said the milestone is proof that the innovative technology — incorporating a gasification process in the upgrader to reduce the consumption of natural gas at the thermal operation — is working.

OPTI said Long Lake is expected to yield the highest quality synthetic crude to come from the oil sands with low operating costs.