Industry supports liquids pipeline from U.S.

Enbridge has received a green light to proceed with regulatory applications for its proposed $1.3 billion Southern Lights condensate pipeline from the Chicago area to Western Canada where the liquids are needed to facilitate transportation of heavy crude from the oil sands.

The Canadian pipeline company assured itself of industry support from the Canadian Association of Petroleum Producers by agreeing to step up development of a $400 million light crude export line from Cromer, Manitoba to Clearbrook, Minn., to ease bottlenecking on Enbridge’s existing network and add 45,000 barrels per day of capacity to an existing line by late 2008.

That will precede the reversal of a 909 mile pipeline from Clearbrook to Edmonton, Alberta, to open the way for 180,000 bpd of diluent to start flowing in 2010.

Regulatory approval is still needed in the U.S. and Canada for the diluent line which Enbridge said is vital to support a tripling of Alberta oil sands production by 2015.

Without the Southern Lights project, Alberta faces a critical domestic shortage of “adequate supplies of reasonably priced diluent,” although those liquids are relatively plentiful in the U.S. Midwest and the Pacific basin.

Enbridge is still hopeful it will complete a 150,000 bpd pipeline to carry Pacific region diluent from Kitimat, British Columbia, to Edmonton, although that project is tied to its proposed Gateway project to ship 400,000 bpd from the oil sands to Asia and California.

Because negotiations with Chinese refineries have bogged down, Enbridge has indicated that Gateway’s original start-up date of 2010 will be delayed to 2012 and possibly 2014.

For economic reasons, Enbridge prefers to build the two pipelines simultaneously, but Chief Executive Officer Pat Daniel said recently a decision could be made in the “next few months” to decouple the projects and build the diluent line sooner.

—Gary Park