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Providing coverage of Alaska and northern Canada's oil and gas industry
September 2008

Vol. 13, No. 36 Week of September 07, 2008

Enbridge, BP bound for Texas Gulf Coast

Canadian pipeline Enbridge has scaled back plans for shipping Alberta oil sands crude to the Texas Gulf Coast, but remains in the picture by forming a partnership with BP top deliver 250,000 barrels per day starting in 2012.

The duo will spend up to C$2 billion to reconfigure existing pipelines and add facilities from Flanagan, Ill., to the Gulf.

Enbridge had previously sidelined a proposed Alberta-Texas pipeline to come onstream in 2014 with capacity of 400,000 bpd.

Company Vice President Steve Wuori said Enbridge has opted for a “phased” approach to pipeline expansion, tying construction to producing growth in the oil sands and the dynamics of the Gulf Coast refining market as heavy oil output in Mexico and Venezuela declines.

However, both of those governments say they are targeting investments to reverse their production declines, while Persian Gulf producers, led by Saudi Arabia, have increasing volumes of heavy oil that could be refined in Texas.

Keystone pushing ahead

Taking a less cautious approach, TransCanada and ConocoPhillips are pushing ahead with their Keystone project to ship 500,000 bpd from the oil sands to the U.S. Midwest and Gulf Coast.

Wuori said the Enbridge-BP system will attempt to match up growing production in Western Canada with new markets in the southern U.S.

He said the cost to shippers on the line will be competitive with other delivery systems into the Gulf Coast, but using existing pipelines and rights of way should minimize the environmental impact, unlike Keystone which is entangled in a lawsuit by U.S. environmental groups, accusing the U.S. government of failing to conduct proper reviews.

BP has not yet decided how much it will commit to the Texas pipeline. It also has a partnership with Husky Energy to ship crude from Husky’s 200,000 bpd Sunrise oil sands development to Toledo, Ohio.

It has been weighing a separate plan to deliver crude to Cushing, Okla., which could feed into the Texas connection.

Wuori said the next step is to negotiate commercial agreements with potential customers before holding an open season to secure firm contracts.

—Gary Park






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