CALGARY, Alberta (AP) Pipeline builder Enbridge Inc. is investing nearly $4 billion in a new round of construction that will increase the flow of Canadian oil sands crude to the U.S. Gulf Coast.
Enbridge, Canada’s largest transporter of crude, said March 27 it will expand its Flanagan South Pipeline from Flanagan, Ill., to Cushing, Okla., to a 36-in. (91 cm) diameter line with a capacity of 585,000 barrels per day.
The Flanagan pipeline, expected to be in service by mid-2014, will be built along the route of Enbridge’s existing pipeline from southeast of Chicago to Oklahoma.
In a separate announcement, Enbridge said it will twin the jointly owned Seaway Pipeline from Cushing to the U.S. Gulf Coast at Houston, where crude is expected to start flowing in June.
The expansion, which includes an extension of the pipeline to Port Arthur-Beaumont, will add 450,000 barrels of capacity to that system. Both projects will cost Enbridge $3.8 billion, including $2.8 billion for the Flanagan project and $1 billion for the twin line and extension of Seaway, which is partly owned by Enterprise Products Partners LP.
The new construction will relieve a supply glut of oil in the U.S. Midwest and boost prices and producers’ bottom lines. Oversupply at Cushing, caused by ever-increasing domestic supplies, has been eroding the value of North American crude. Draining that oil to refineries along the coast would likely act to lift prices and increase producer revenue.
The construction also gives Enbridge an edge in the race to tap into profits from domestic oil over rival TransCanada Corp., which is still waiting for U.S. State Department approval for its controversial Keystone XL pipeline.
Aside from Enbridge’s network of oil pipelines, oil sands crude can get to the U.S. market now through TransCanada’s base Keystone system, which currently delivers crude to the U.S. Midwest and Cushing.
Crude from the oil sands and oil-rich states like North Dakota and Montana currently runs into a logjam at Cushing because of a lack of pipeline capacity and a limited number of rail cars that can transport the oil south to Texas refineries. Oilsands producers say there’s enough pipeline capacity from Canada to the United States for now, but their planned expansion in the years ahead depends on new pipelines — the full Keystone XL or Enbridge’s Northern Gateway pipeline across northern British Columbia to the West Coast. Some have touted rail transport as a stop-gap solution.
TransCanada recently announced plans to build the most urgently needed portion of its controversial Keystone XL oil pipeline as a $2.3 billion stand-alone project.
U.S. President Barack Obama pushed for the speedy approval for the southern leg of TransCanada’s Keystone XL pipeline as he said oil has an important place in his national energy plans.
The announcement came just a few weeks after Obama rejected the entire length of Keystone XL, a pipeline that would transport Alberta oil sands bitumen from the northern reaches of the province through six U.S. states to Texas.
The president said there wasn’t enough time to review a new route around a crucial aquifer in Nebraska in order to meet a deadline imposed by congressional Republicans.
