Enbridge shuts 3rd pipeline, outages near 1 million bpd

NEW YORK Mon Sep 13, 2010 7:55pm EDT

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NEW YORK (Reuters) - Canada's Enbridge on Monday said a suspected oil leak forced it to close another U.S. pipeline that carries Canadian crude, this time in New York State, just four days after a leak in Illinois forced it to shut a massive export pipeline.

The Canadian pipeline giant said it shut the 70,000 barrel per day (bpd) Line 10, a 91-mile pipe from Westover, Ontario, Canada into New York State.

A New York state official said the shutdown came after a suspected oil spill from the line -- which was likely less than one gallon -- near Buffalo, New York, around 300 miles northwest of New York City.

The latest closure meant Enbridge now has three U.S. stretches of pipeline shut in, with a combined capacity of 930,000 bpd. The shutdowns helped to prompt U.S. crude futures to month-long highs on Monday.

The Calgary-based company was also working to remove a leaky section of the largest oil pipeline linking Canada to the U.S. Midwest, Line 6A. It was found to be leaking crude in Illinois last Thursday.

The company has also kept its 190,000-barrel-per-day Line 6B pipeline shut since a it leaked almost 20,000 barrels into a Michigan waterway in late July.

Few details were available on the latest pipeline closure, at Line 10. An Enbridge spokesman, Glenn Herchak, said the line was shut after a "potential" leak, which remains under investigation.

Oil markets have been focused on the spill and repairs at Enbridge Line 6A. The massive pipeline that runs 467 miles from Superior, Wisconsin to Griffith, Indiana, is a main conduit of crude from Canada, the top oil supplier to the United States.

That spill, 30 miles southwest of Chicago, sent crude oil futures to one-month highs. It came six weeks after the smaller Enbridge line 6B on the same Lakehead pipeline system spilled 20,000 barrels of crude in Michigan in late July.

Neither Enbridge nor government officials had any timeline for restarting the 670,000 barrel per day (bpd) 6A line, which was running at 459,000 bpd before the leak. Herchak also declined comment on when the much smaller Line 10 could restart.

Enbridge said it had cleaned up 6,050 barrels of the 6,100 barrels of crude oil that had leaked through a 1-inch (2.5-cm) hole at 6A and was looking for different routes to deliver crude to the U.S. midcontinent refineries.

"Enbridge's schedulers are working with shippers to divert crude oil volumes to other available pipelines and storage facilities," the company said early Monday.

When the damaged section of Line 6A has been removed from the ground, it will be sent to the National Transportation Safety Board for inspection and evaluation, along with a section of a water line that was underneath Line 6A, Enbridge said.

JP Morgan analysts warned that the suspension of crude shipments on the 6A line had the potential to reduce flows to Cushing, the delivery point for benchmark U.S. crude futures, by around 300,000 bpd.

If 6A's outage lasts beyond two weeks, it could help narrow the discount of front-month U.S. crude to the second-month, the bank said. It could also push U.S. crude to a premium to London's Brent crude, enticing more imports from overseas to meet a potential supply shortfall.

But given high oil inventories at Cushing and the wider Midwest and environmental concerns after the spill at BP's Macondo offshore Gulf of Mexico rig this year, regulators are likely to take their time in allowing pipeline flows to resume, the bank said.

U.S. regulators still have not allowed Enbridge to restart its 190,000-bpd Line 6B, which runs from Griffith, Indiana, to Sarnia, Ontario, after it was shut on July 26 by a rupture near Marshall, Michigan.

Repairs to the line, which spilled 19,500 barrels into the Kalamazoo River system in one of the largest pipeline leaks in recent U.S. history, were completed in August.

In 2007, Enbridge received approval to restart a pipeline just days after a deadly explosion killed two workers.

OIL MARKET IMPACT

U.S. crude futures settled up 74 cents to $77.19 a barrel, their highest settlement since August 11.

Prices for gasoline and ultra-low sulfur diesel in the Midwest cash markets jumped due to the outage, even though several refineries in the Chicago area were scheduled to go into seasonal maintenance in the coming weeks.

The discount of U.S. crude to London Brent also widened 13 cents to $1.84 from $1.71 on Friday. When U.S. crude trades stronger relative to Brent, it tends to draw more oil imports to the United States.

"There has been some speculation in the markets this morning that the line 6a could be back up and running in 48 hours," said Tom Bentz, broker, BNP Paribas Commodity Futures, New York, adding: "It has caused spreads to widen back out a bit and flat price to back off the highs."

(Reporting by Erwin Seba in Houston, David Sheppard and Selam Gebrekidan in New York, Sakthi Prasad in Bangalore and Alejandro Barbajosa in Singapore; Writing by Joshua Schneyer and Erwin Seba; Editing by David Gregorio.)

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