Enbridge in toll dispute with Suncor

Gary Park

For Petroleum News

Launching two major pipeline projects well ahead of schedule sounds like a clear-cut victory for Enbridge, but that isn’t the view of oil sands producer Suncor Energy.

Richard Bird, chief financial officer of Canada’s second-largest pipeline company, said Jan. 20 that both the Canadian and United States segments are due to be placed in service on April 1, three months ahead of the original target date.

The 450,000-barrel-per-day Alberta Clipper project covers 1,000 miles, linking the Alberta oil sands with Superior, Wis.

In addition, Enbridge’s Southern Lights line, which will deliver ultralight crudes from the U.S. Midwest to the oil sands for blending with bitumen to allow the tarry substance to be carried by pipeline, is also expected to be completed “well before our end-of-the-year contractual target,” he said.

Bird said tariffs filed with regulators for Alberta Clipper will be effective April 1, raising shipping costs on the company’s mainline system to the United States.

Those increases are being challenged by Suncor, which has asked the U.S. Federal Energy Regulatory Commission to defer the hike.

A Suncor spokeswoman said, “We support additional capacity, but the timing of Clipper is no longer a prudent fit with supply.”

“We are concerned about the potential impact of unnecessary pipeline-related costs in view of unused capacity on the competitiveness of Canadian heavy oil sands crude into the U.S.”

Enbridge: terms negotiated with shippers

He said Enbridge understands Suncor’s concerns, but the tolls on “our mainline system are going to increase as a result of the circumstances that have changed since the Alberta Clipper project was approved.”

He said Enbridge will work with Suncor and the Canadian Association of Petroleum Producers “to do everything that we can to make it right.”

Despite the flurry of re-started oil sands projects, production forecasts are trailing far behind the 2006 prediction of 3.5 million bpd by 2020 and now stand at about 3 million bpd.

“Additional growth that was signed for in the contract area and growth out of the oil sands has diminished, so for sure our tolls will be higher than expected,” Bird said. “But that goes with the toll arrangement.”

RBC Capital markets estimated that a FERC decision in support of Suncor could defer about 5 percent of Enbridge’s estimated 2001 earnings, or about 15 cents per share.

However, it, too, does not expect FERC to delay the in-service date.

Bob Hastings, an analyst with Canaccord Adams, said it is unusual for Enbridge to have a toll dispute with its shippers.

TransCanada pipelines President Russ Girling told the same conference that his company’s 490,000 bpd Keystone pipeline from Alberta to Wood River-Patoka, Ill., is on schedule and 83 percent contracted.

He said oil sands production will continue to grow and U.S. markets will need imported crude.

“There is some question whether or not demand for refined product will increase in the U.S. over time, but what we know is that the U.S. is going to import a lot of crude for a considerable period of time.”