The jostling to build more oil pipeline capacity out of Alberta has turned from push to shove, with Enbridge quietly unveiling plans for a possible 400,000 barrel-per-day direct link to Texas.
The 36-inch, C$3.6 billion system would cover about 2,000 miles from the Hardisty Hub in Alberta to the Houston refinery region and could be in service by 2011, said Richard Bird, Enbridge’s executive vice president of liquids.
It also raises to six the number of ventures competing to access United States markets, offering 2.1 million bpd of new export capacity on top of the 1.7 million bpd of conventional and heavy crude Canada currently delivers to the U.S.
Bird said shippers have already shown interest in the possibility of a bullet line, but it will be up to them to make the commitments that will see the project go ahead.
Otherwise, Enbridge could offer a more expensive link from either Chicago or Cushing, Okla., to Texas, but that longer route would require higher tolls.
Bird told a Calgary conference that contracted volumes of 400,000 bpd are required to make the new proposal economic.
The proposal sees Enbridge lock horns with privately held Altex Energy, which is also trying to line up support for a 250,000 bpd direct route from Alberta to the U.S. Gulf Coast, which is targeted for a 2010 in-service date.
Altex: proprietary diluentAltex Chief Executive Officer Jack Crawford said his company’s plans won’t be altered in response to Enbridge, claiming Altex has the edge because of its plans to use a proprietary diluent to facilitate the shipment of heavy crude by eliminating the need for conventional diluent that is rising in cost as domestic supplies shrink.
He said that by combining technology and its own diluent Altex can take away the penalty of paying a premium for diluent in Alberta and taking a write down at the delivery end where the diluent is worth less.
Crawford estimated the cost of shipping on the Altex pipeline could be about half the tolls paid on a competing system.
He had previously estimated that shippers relying on conventional diluent would pay tolls of $8-$10 per barrel for bitumen, making the Altex pipeline economical at 250,000 bpd. Bird said that if oil sands production rises by 2 million bpd by 2015 Enbridge thinks only 750,000 bpd of that increase will find markets in the U.S. Midwest.
It has calculated that the Gulf Coast could handle 200,000-400,000 bpd of oil sands crude, with 750,000 bpd going to east of Chicago, 100,000 bpd to the Midwest, 50,000 bpd to the Rockies, 10,000 bpd to California and 300,000-500,000 bpd to Asia.
Enbridge: increasing pipe sizesTo accommodate those demands, Enbridge has increased the planned size of several pipelines including Waupisoo from the Athabasca oil sands to Edmonton to 30 inches from 24 inches; Gateway, from Edmonton to Kitimat, British Columbia, for tanker shipment to California and Asia to 36 inches from 30 inches; its Southern Access line in Wisconsin to 42 inches from 30 inches; and the Southern Access extension from Wisconsin to Chicago to 36 inches from 30 inches.
In addition, Enbridge is working on its $1.8 billion Alberta Clipper project to carry 400,000 bpd from Edmonton through Wisconsin to Chicago, paralleling its existing mainline.
That puts it head-to-head with TransCanada’s Keystone project, which is designed to transport 400,000 bpd from Alberta to Illinois and has put the application before regulators, while Enbridge anticipates filing an application for Clipper late this year.
TransCanada believes it is ahead of the pack having signed 300,000 bpd of shipping contracts with ConocoPhillips.
In addition to the race to line up shippers there is the challenge of developing new markets by matching various crude types with U.S. refineries which are reluctant to sign long-term supply contracts.
That also leads to the debate over whether it is better to deliver raw bitumen to the U.S. or gain control of the value-added end product by building new upgrading capacity in Alberta.