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Race to the US Gulf Coast New partnership of Enbridge, Energy Transfer Partners, launches plan to access eastern Gulf for Bakken and Western Canadian crude Gary Park For Petroleum News
A new joint venture by Enbridge and Energy Transfer Partners, ETP, is zeroing in on the Eastern Gulf Coast crude market, with plans to spend up to $3.4 billion to deliver as much as 660,000 barrels per day of crude from the Bakken and Western Canada.
Enbridge views the 3 million bpd capacity of the Louisiana market as an “excellent fit with our broader market access initiatives.”
Steve Wuori, president of liquids pipelines at the Calgary-based company, said there is ample opportunity for crude on the 700-mile link from Flanagan, Ill., to displace imported crude in the Gulf Coast region.
Enbridge Chief Executive Officer Al Monaco said the eastern Gulf refineries are “configured nicely for a market that is screaming out for heavy crude” to offset the declining volumes from Mexico and Venezuela.
He said Enbridge’s comprehensive bundle of projects will “go a long way” to ease price discounting “that Western Canadian and Bakken producers currently are facing as well as to meet the demand of North American refiners seeking reliable domestic supply.”
Addressing crude bottlenecks ETP President Marshall McCrea said the joint-venture project, which needs approval from the Federal Energy Regulatory Commission to reverse a portion of natural gas trunkline from Patoka, Ill., to St. James, La., would address crude bottlenecks on the North American pipeline network.
He said ETP looks forward to working with Enbridge to establish a “key transportation conduit to link a diversified slate of reliable, long-term crude oil reserves to refineries along that eastern Gulf Coast.”
If FERC approval is received later this year, the new 30-inch diameter system could be in service by early 2015, with Dallas-based ETP as operator.
For Enbridge, it is also part of a strategy to recapture Bakken crude that is now being carried by rail.
The use of that option contributed to a 16 percent decline in the fourth quarter of 2012 in shipping volumes on the Enbridge pipeline system in North Dakota that is operated by subsidiary Enbridge Energy Partners, EEP.
EEP President Mark Maki told analysts earlier in February that the company`s strategy, including its Light Oil Market Access Program to access refineries in the U.S. Midwest, Ontario, Quebec and possibly farther east in the US and Canada, will remedy that loss of volumes “in due course.”
Surge in rail movements Wuori conceded that Enbridge in 2012 saw a “real surge in rail movements, especially out of North Dakota and somewhat out of (the Williston basin) in Saskatchewan,” lowering utilization on the North Dakota system to 74 percent.
He said that to move discounted crudes like those found in the Bakken by rail to the St. James refinery hub costs $12-$17 per barrel, although a rail shipper still has a “better netback than on pipe.”
Tudor Pickering Holt estimates that more than 60 percent of total Bakken production is leaving the basin by rail, but said that another 500,000 bpd of pipeline capacity to Louisiana and Texas would strengthen the thesis that after 2013 only minimal crude will be carried by rail from the Bakken to both the eastern and western Gulf Coast, while shippers use rail to access the eastern and western seaboards of the U.S.
Wuori noted that the tremendous demand in the St. James/New Orleans market for Bakken crude currently accounts for 400,000 bpd arriving by rail.
Seaway reversed In the western Gulf, Enbridge and its partner Enterprise Products Partners recently reversed the 400,000 bpd Seaway pipeline from Cushing, Okla., and are working on a number of initiatives to debottleneck the downstream end of Seaway, although the partnership is not yet ready to estimate the eventual run rate for the pipeline.
RBN analyst Sandy Fielden warned that if TransCanada’s proposed 830,000 bpd Keystone XL application is turned down by the Obama administration, the Enbridge-ETP pipeline would “create additional space from Canada. If Keystone goes ahead (the joint venture project) is already looking shaky.”
He said shipper commitments in an open season expected to be held before mid-2013 would likely be limited pending a verdict on Keystone XL’s fate.
The desire by Enbridge-ETP to go ahead was indicated in Monaco’s comment that commitments or only 250,000 bpd, or “a bit less,” would be needed in an open season to make the project economically feasible, although Enbridge said it has the ability to install less horsepower on the line to match the initial level of interest by shippers and enable the “project to proceed at a lower commitment level than would normally be the case.”
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