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New Pipeline to Rival Keystone XL

Wednesday, March 28, 2012

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TransCanada’s Keystone XL pipeline is getting competition in the race to bring Canadian oil to Gulf Coast refineries, as two North American companies have teamed up to build a rival system.

Calgary-based Enbridge Inc. and Houston-based Enterprise Products Partners L.P. announced Tuesday (March 27) that they would expand the Seaway Pipeline,  more than doubling its capacity to 850,000 barrels of crude oil per day by 2014.

 Enbridge Inc.

 Enbridge Inc.

Enbridge and Enterprise Products Partners already operate the Seaway Pipeline. The flow of the once-northbound pipeline has been reversed, and more new lines are being built at the southern terminus.

The new 512-mile, 30-inch diameter twin lines will add 450,000 barrels per day (BPD) of capacity to the existing system, the companies said.

No State Dept. Role

Unlike the Keystone XL expansion, which has become mired in an election-year stand-off between President Obama and congressional Republicans, the Seaway project does not require State Department approval because the cross-border segments are already in place.

The companies already operate the Seaway Pipeline, which used to move oil north from Freeport, TX, to Cushing, OK. The companies decided last year, however, to reverse the flow of that pipeline, to take advantage of surging Canadian oil supplies.

The reversal will bring 150,000 barrels of crude per day from Cushing to the Gulf Coast by June 1, with capacity increasing to 400,000 BPD by the first quarter of 2013, the companies said.

The new project will run along the right-of-way the companies already own from Cushing, OK, to Freeport, near Houston.

Supporting Pipelines Planned

Enbridge also announced this week that it would expand its Flanagan South Project pipeline, which will further piggyback on the capacity of the reversed Seaway system, the companies said.

Earlier, the companies announced construction of a new 85-mile 30-inch diameter pipeline that will run from Enterprise’s storage hub southeast of Houston to refineries around Port Arthur, TX. Service on that line is expected to begin early in 2014.

The Seaway project will require approval by the U.S. Federal Energy Regulatory Commission and the U.S. Army Corps of Engineers.

‘Timely, Economic and Complete’

“Based on the tremendous response to the open commitment period, shippers have recognized the advantages Seaway offers in being able to provide a timely, economic and complete solution for relieving not only the bottleneck at Cushing, but facilitating the development and delivery of North American energy reserves,” said Michael A. Creel, president and chief executive officer of Enterprise’s general partner.

Map of Seaway Pipeline

Creel said the new project would promote “energy independence” and create jobs.

Enbridge CEO Pat Daniel said the new pipelines would provide emerging crude-oil producers in North Dakota’s Bakken Shale oil field region and elsewhere “to move secure, reliable supply to U.S. Gulf Coast refineries, offsetting supplies of imported crude.” He added, “By leveraging existing infrastructure wherever possible, impacts to landowners, communities and the environment will be minimized.”

Pipeline Glut?

The Enbridge/Enterprise announcement came just one day after President Obama traveled to Cushing—the self-described “Pipeline Crossroads of the World,” where oil supplies are currently backed up—to announce his support for construction of the 485-mile southern leg of TransCanada’s Keystone XL pipeline extension

That project’s northern segment, which terminates in Alberta, is currently in limbo over environmental and political issues.

Even if the full Keystone extension is eventually approved, however, there will be plenty of oil to go around, The Wall Street Journal reported this week, after surveying industry analysts.

“Canadian oil-sands production is expected to double to 3 million barrels a day between 2010 and 2020, while total Canadian crude production is expected to increase 50 percent to 4.2 million barrels a day over that period,” the newspaper said, citing the Canadian Association of Petroleum Producers.

Meanwhile, in the U.S., the Energy Information Administration predicts that shale drilling will increase oil production by up to 20 percent by 2020, the newspaper reported.

   

Tagged categories: Construction; Oil and Gas; Partnerships; Pipeline

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