Bakken producers on both sides of the United States-Canada border can increasingly see an answer to their hopes of accessing new North American markets by pipeline.
Canadian pipeline companies Enbridge and TransCanada are in full flight, seeking commercial backing and regulatory approval to hasten the extension and expansion of delivery systems to the U.S. Gulf Coast and possibly the Atlantic Seaboard.
Enbridge with partner Enterprise Products Partners has launched its Seaway connection to the Texas Gulf Coast, despite losing an application to the Federal Energy Regulatory Commission to set flexible rates known as a market-based tariff for a system that is targeted at 450,000 barrels per day by year’s end and an ultimate 850,000 bpd.
TransCanada announced it had made another stab at gaining a U.S. Presidential Permit for the Keystone XL pipeline to the Gulf Coast.
And both are attracting interest in their plans to ship crude to refineries in Eastern Canada and relieve a crude bottleneck at Cushing, Okla.
Mark Hurley, Enbridge’s senior vice president, crude oil and offshore, said two-thirds of the 150,000 bpd is committed at “walk-up” rates of $3.82 per barrel for lighter crudes and $4.32 for heavier crudes. For long-term contracts shippers will pay $2.75-$3.25 per barrel.
By mid-2014 Enbridge also expects to have upsized its Flanagan South pipeline combined with its existing Spearhead system to 775,000 bpd.
How much from Bakken unknown
Both companies say they will draw volumes from the Bakken, although neither can say exactly how much.
Enbridge Chief Executive Officer Pat Daniel said that data is not available because shippers “don’t tell us what they’re doing.”
If it can survive a fresh round of contentious debate and if President Barack Obama gets re-elected in November, TransCanada expects its rerouted Keystone XL line will offer 830,000 bpd of capacity by late 2014 or early 2015.
To date 500,000 bpd oil sands in XL
So far, shippers have entered long-term contracts to move more than 500,000 bpd of Alberta oil sands crude in XL.
TransCanada said it also has subscriptions for another 65,000 bpd of the 100,000 bpd reserved for the Bakken Marketlink, allowing Williston basin crude from Montana and North Dakota to flow into the system.
The U.S. State Department has not set a new timeframe for deciding whether to give TransCanada the permit, referring only to an earlier estimate of no sooner than the first quarter of 2013, allowing construction to start that quarter.
Opponents of XL say the modified route still puts Nebraska’s key water resources in jeopardy and others are demanding a completely new environmental review, ignoring what has taken place since September 2008.
Charlie Drevna, president of the American Fuel & Petrochemical Manufacturers, said in a statement that the “anti-fossil fuels extremists opposed to the construction of the Keystone XL pipeline will look for any reason, no matter how baseless and absurd, to oppose the vital pipeline that would benefit millions of American consumers, create thousands of jobs and increase America’s economic and national security.”
Sen. Lisa Murkowski of Alaska said in a statement that opening the way for Canadian oil to reach Gulf Coast refineries “should be a simple economic decision. It will not only enhance our trading relationship with one of our greatest allies, it will also bring badly needed jobs and reduce our oil imports from OPEC.”
“This project has been caught up in presidential politics long enough. It’s time to get to work,” she said.
Current situation discourages domestic production
TransCanada said in its new application that the up-to-$20 per barrel premium Americans are paying for internationally benchmarked Brent crude over West Texas Intermediate from the U.S. midcontinent has hiked gasoline prices while discouraging U.S. domestic oil production.
It said disparity between international and U.S. crudes that has emerged and persisted over the past three years since XL was first proposed can be solved if XL proceeds.
The same argument is being made by the two pipeline companies and oil producers as they compete for shipper interest to deliver crude from Alberta and the Bakken to Eastern Canada and possibly the Atlantic Seaboard.
ENB’s eastern access strategy
Enbridge said it expects to spend upwards of C$2 billion on what it describes as its “next wave of capital and growth opportunities” for the company under its Eastern Access strategy, which is rapidly diverting attention from its hotly contested Northern Gateway proposal.
The push east is designed to handle growing volumes from the Alberta oil sands and the Bakken.
The current target is to connect with Montreal-area refineries, but Daniel disclosed that Enbridge also has its eye fixed on further extensions to possibly Quebec City, Saint John in New Brunswick and Philadelphia.
He said refineries in those areas see “some significant advantage” in being able to access oil sands and Bakken crudes.
Company President Al Monaco said Enbridge is “especially bullish” about the future of oil sands production, along with an uptick in U.S. shale oil volumes from the Bakken, Permian basin, Eagle Ford and Niobrara plays and is “making very good progress in commercial discussions” with prospective shippers.
Monaco said the first stage of the Eastern Access plan needs approval from Canada’s National Energy Board, or NEB, for reversal of Line 9 by next spring to initially carry 150,000 bpd of crude across Ontario from Sarnia to Westover and ultimately expand capacity to 250,000 bpd.
Linked to that is replacement and expansion work on Line 6B from Chicago/Flanagan in Illinois to Sarnia, with a spur line to Toledo, Ohio, plus a 50,000 bpd addition to the 500,000 bpd Line 5 from the Enbridge Mainline to Sarnia.
Also included in the proposed C$2 billion investment is a continuation of Line 9 from Westover to Montreal.
NEB is scheduled to start public hearings May 23 on the Line 9 application, which faces stiff opposition from First Nations and environmental groups.
Enbridge reported that it now expects to spend C$26 billion on secured and risk-adjusted pipeline projects over the 2011-15 period, up C$6 billion from its previous estimate last October, and said it is investigating another C$30 billion worth of opportunities.
