Enbridge sees pipeline squeeze despite expansion

Mon Jun 18, 2012 5:17pm EDT

* Sees pipelines constrained by 2017

* Says Northern Gateway may provide some relief

* Sees 250,000 bpd of Seaway capacity by yearend

By Julie Gordon

TORONTO, June 18 (Reuters) - Enbridge Inc, Canada's No. 2 pipeline company, said on Monday faster than expected growth in North American oil output means its lines could be at full capacity as soon as 2016 despite a C$3.2 billion ($3.1 billion) expansion of its system.

Enbridge, whose lines carry the bulk of Canada's oil exports to the United States, is struggling to cope with booming oil output from the Alberta oil sands and from shale-oil fields such as Bakken in North Dakota.

The company expects to complete a huge expansion of its North American pipeline network in 2014, bulking up its massive mainline, which currently ships close to 2 million barrels of crude per day, and tapping new refining markets in Quebec. The planned mainline expansion will add more than half-a-million barrels a day of new capacity within two years.

Enbridge President Al Monaco said the company and partner Enterprise Products Partners LP could add another 250,000 bpd of capacity on the 150,000 bpd Seaway pipeline, which runs from Cushing, Oklahoma, to the U.S. Gulf Coast by yearend, earlier than its previous target for the first quarter of 2013.

Tight pipeline capacity lowers prices for producers and the expansion could help narrow the difference between Canadian and U.S. oil prices. But any relief for oil producers from the 2014 expansion could be short-lived as forecasts call for production from Canada alone to rise by more than half by the end of the decade. [ID:nL1E8H56Wl}

That could choke the system once more if lines such as Enbridge's planned 525,000 bpd Northern Gateway pipeline to the Pacific Coast are not completed.

"I think we will be capacity-constrained going forward, probably in the range of 2016 and 2017," Monaco told reporters on Monday following a speech in Toronto. "There's a number of opportunities out there to further expand capacity, I think one of them, frankly, that is a great opportunity is Gateway ... And the advantage of Gateway, of course, is that it accesses a very large market."

The C$5.5 billion Gateway project would offer Canadian producers their first significant access to booming Asian markets and steer oil away from the glutted U.S. Midwest if completed on schedule in 2017.

The project is supported by oil producers and the Canadian government, but it is bitterly opposed by environmentalists and by many British Columbia aboriginal groups concerned about potential oil spills. Even if the line is approved by regulators, court challenges could further delay construction.

Enbridge shares fell 24 Canadian cents to C$39.14 on the Toronto Stock Exchange on Monday.

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