Playing a new hand

Set of pipeline options disclosed by Enbridge offer alternative link to Gulf Coast

Gary Park

for Petroleum News

Calgary-based Enbridge, which owns North America’s largest oil pipeline network, has figured out that the uncertain Keystone XL project is not the only way to deliver hundreds of thousands of incremental barrels of crude from Alberta to the U.S. Gulf Coast.

Operating away from the harsh glare of public attention, the company is assembling the pieces that suggest it doesn’t need a transportation system on the grand scale of Keystone XL to achieve the same results.

A combination of Line 3, which is under constant attack from Indigenous and environmental activists despite having obtained a full slate of regulatory approvals, and Southern Access, which is scheduled to start service in 2021, could be the key link in Enbridge’s hopes of optimizing its entire Mainline system from Alberta to Ontario.

If the extension of Southern Access does meet its latest startup date, six years behind the original timetable, it will carry 300,000 barrels per day on the US$765 million, 167-mile route down Illinois from Flanagan to Patoka.

Line 3, which replaces an aging pipeline, is designed to ship 760,000 bpd from Alberta through Illinois to Wisconsin, is now expected to ship its first oil by late 2021.

“We can probably optimize by another 200,000 to 300,000 barrels per day” from those ventures, said Vern Yu, Enbridge’s executive vice president and president of liquids pipelines, told the Financial Post.

He said that volume is equivalent to the types of crude Enbridge feeds into its pipelines and “how we can maximize the pumping capacity of all five Mainline network pipelines. We can do all of this without needing to invest any further capital or to get more permits.”

Enbridge currently operates the Flanagan South and Seaway Twin pipelines which provide a connection from the U.S. Midwest to the Gulf Coast and has declared it is looking to capture more of the Gulf Coast market, where refineries are equipped to handle heavy crudes.

Yu conceded the Line 3 and Southern Access projects were part of that strategy, which would offer more outlets for transportation-strapped Alberta oil sands producers.

“It could be a partial mitigation to other pipelines if they don’t go forward,” he said.

‘Under the radar’

Included in the package is the reversal of the 1.2 million bpd Capline Pipeline, owned by Marathon Pipe Line and Plains All American Pipeline.

Capline is the largest northbound pipeline from the oilfields of Texas and the Gulf Coast to inland U.S. refineries.

Skolnick said a teaming up of Line 3, Southern Access and Capline could offer Canadian producers a multi-destination alternative to the 830,000 bpd Keystone XL.

He said that “kind of insurance” would be perfect for producers if it could offer 1.2 million bpd of capacity from the Alberta trading hub to Louisiana.

However, TC Energy is not about to walk away from its shipping commitments for Keystone XL.

A company spokesman said the project has been “fully contracted short of the minimum capacity required by regulators to be set aside for walk-up shippers.”

The challenges facing Enbridge were laid out in early December by Chief Executive Officer Al Monaco, who told investors it has become more difficult to build major oil pipelines which now carry a higher “risk premium” to account for longer lead times.

The company has already had a taste of that new world with Line 3, whose costs have soared from US$2.9 billion to US$6.7 billion and face another revision in the first quarter of 2021.