Enbridge Inc., the largest transporter of Canadian crude to the United States, and its partner, Dallas-based Energy Transfer Partners, have revealed plans to convert part of their natural gas pipeline to carry oil to the Gulf Coast, investing up to $3.4 billion in the scheme.
The two companies will own equal shares in the joint venture, which will transport oil from a pipeline hub in Illinois to refineries in the eastern Gulf Coast. According to the Edmonton Journal, each company will invest between $1.2 billion and $1.7 billion and Energy Transfer Partners will be in charge of the operation. It is estimated that the pipeline will have the capacity to carry between 420,000 and 660,000 barrels per day of crude. The new service is expected to be in action by 2015 and is currently awaiting approval from U.S. regulators, Enbridge announced.
If the project gets the go-ahead from regulatory bodies, a number of existing pipelines would be redeployed, such as part of Energy Transfer's Trunkline natural gas system, as well as Enbridge's new Southern Access Extension, which is under development. Once ready, the new pipeline will stretch to a total of over 1,000 kilometers from Patoka, Ill., to St. James, La.
Recently, oil sands companies have been forced to deal with the complicated situation of struggling to find a market for their production, as their output outstrips their ability to carry it to potential customers. As a result of the lack of available pipeline space, Enbridge had to start rationing space on its 2-million-barrels-per-day mainline network last November. The company acted against producers who over-booked space on its pipelines, as it made attempts to reduce delivery delays and improve efficiencies on its network.
According to Steve Wuori, Enbridge's president of liquids pipelines and major projects, the company is beginning to reap the benefits from those efforts. Enbridge owns and operates the biggest oil-pipeline network in Canada and its network spans 24,738 kilometers, shipping more than 2.2 million barrels of crude and liquids on a daily basis, according to its website. The Calgary-based company is to invest C$15 billion in the next three years to add capacity for 1 million barrels of Alberta crude, said Al Monaco, president and chief executive of Enbridge.
The project is a key step in the company's larger-scale plans for improving access to the eastern Gulf Coast crude oil market and responds to significant interest from producers and refineries, he added. Monaco also noted that the project will be relying on existing pipe in the ground, so the environmental footprint will be minimal, while operations can start soon and address the price disparities existing at present.
Mackie McCrea, president and chief operating officer of Energy Transfer Partners, commented that the project would optimize the company's assets and establish a key transportation link to ensure reliable, long-term crude oil reserves reach refineries along the eastern Gulf Coast.