UPDATE 5-Enbridge U.S. oil line to be shut for four more days

Sun Mar 4, 2012 7:12pm EST

* Line 14 seen restarting Weds, Line 64 on Thurs

* Lines upstream of Superior to be slowed or shut

* Canadian oil discounts expected to deepen

By K.T. Arasu

NEW LENOX, Illinois, March 4 (Reuters) - A key segment of Enbridge Inc's oil pipeline system in the U.S. Midwest will remain shut down for up to four more days after a deadly vehicle accident in Illinois caused an oil leak and fire, likely squeezing supplies for refiners in the region, the company said on Sunday .

The shutdown of Enbridge's 318,000 barrel a day Line 14/64, part of a network that carries oil produced in Canada to Griffith, Indiana, from Superior, Wisconsin, is also expected to pressure already-weak prices for Canadian crude this week as supplies back up in Alberta, market sources and analysts said.

U.S. crude oil futures rose 15 cents to $106.85 a barrel after trading opened in Asia on Sunday.

Enbridge, whose pipelines carry the bulk of Canadian oil exports to the United States, idled the line early Saturday after what emergency officials described as a two-vehicle collision at an above-ground portion of the conduit close to a pumping station near the township of New Lenox, Illinois.

Two people, including a firefighter, were reported killed and three others were critically injured.

The westernmost portion of the pipeline, Line 14, could restart on Wednesday and the remainder, Line 64, on Thursday, Enbridge spokeswoman Lorraine Little said in an email. She cautioned that the timing was based on initial assessments and was subject to change.

The outage will have a large impact on other parts of the massive pipeline system, she said.

"Our scheduling and supply management staff are reworking schedules to maximize capacity on other lines," she said.

Enbridge will be forced to slow the flow of crude on pipelines between Alberta and Superior, or it may even shut some down, to make sure storage tanks do not become filled to capacity, she said. In addition, the pipelines that carry crude oil to the main system from Western Canadian production facilities also face flow restrictions.

At the site on Sunday, about 70 miles (113 km) southwest of Chicago, emergency officials and police had cordoned off the area and kept all but company and emergency personnel away. AS many as 200 Enbridge and contract workers were on site, Little said.

The incident occurred in a largely rural area surrounded by low-rise warehouse buildings. It is about one mile (1.6 km) from a housing subdivision.

About 10 flatbed tractor trailers brought in square wooden polls about 20 feet (6 metres) long to lay over the spill so vehicles could move in the spill area. Other trucks trundled in with loads of rocks.

Enbridge said it did not know yet how much oil had leaked before it closed off the valves on the pipeline. Early estimates by the Illinois Emergency Management Agency ranged between 2,500 gallons and 20,000 gallons.

The company's last major oil spill was in the summer of 2010, when more than 20,000 barrels of crude gushed into the Kalamazoo River system in Michigan from another of its pipelines after a rupture. It was shut for more than two months.

The overall system, comprising several pipelines, extends to the U.S. Midwest, Midcontinent as well as southern Ontario from Alberta, where most Canadian crude is produced. Overall capacity is more than 2 million barrels a day.

Line 14/64's capacity is equal to about 3 percent of total U.S. oil imports. It carries a range of oil, including light synthetic derived from the Alberta tar sands as well as light, medium and heavy conventional oil.

CAPACITY CONSTRAINED

Several U.S. Midwest refineries could face tight supplies. Enbridge has one other pipeline that carries oil to Griffith from Superior, the 670,000 barrel a day Line 6A.

Exxon Mobil Corp said it gets some oil from Line 14/64 for its 238,600 barrel a day Joliet, Illinois, refinery, but stressed it was still meeting its contractual obligations.

The shutdown could help shrink a glut of oil supplies in the U.S. Midwest and Midcontinent, where inventories in the week ended Feb. 24 rose to their highest since September 2011, according to the U.S. Energy Information Administration.

That situation, marked by brimming storage tanks at the Cushing, Oklahoma, delivery point, has been a major factor in the value of U.S. benchmark oil dwindling in comparison with international grades such as Brent.

Canada is the largest foreign supplier of oil to the United States, and prices for its light, synthetic and heavy grades have been heavily discounted this year due to surging production and tight space on Enbridge's system and others.

"Any pipeline disruption is never good for Canadian (price) differentials," a crude marketing source said. "The market is already logistically constrained as it is. I expect there to be a lack of liquidity until the severity of the issue is known."

The storage hub of Hardisty, Alberta, was 46 percent full on Feb. 24, according to data monitor Genscape. That compares with 48 percent full two weeks earlier and is about midway between highs and lows since the company began tracking Hardisty storage nearly two years ago.

Genscape vice-president Abudi Zein said total storage is important, but the market is more affected by the gains and losses at the hub. A build indicates traders are struggling to sell supplies, Zein said.

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