Chevron seeks priority pipeline access in Canada

CALGARY, Alberta Tue Jun 19, 2012 6:56pm EDT

Gasoline is priced over $5 per gallon at a Chevron gasoline station in downtown Los Angeles, California March 13, 2012. REUTERS/Fred Prouser

Gasoline is priced over $5 per gallon at a Chevron gasoline station in downtown Los Angeles, California March 13, 2012.

Credit: Reuters/Fred Prouser

CALGARY, Alberta (Reuters) - Chevron Corp (CVX.N) is seeking priority access to capacity on the Trans Mountain pipeline to Canada's West Coast from Alberta, saying crude supplies for its British Columbia refinery are dwindling as other shippers clamor for limited capacity.

In an application to the National Energy Board on Tuesday, Chevron said its Burnaby refinery has been getting elbowed out of space on the Kinder Morgan Energy Partners-owned KMP.N pipeline. The plant, which supplies nearly a third of the gasoline in Canada's Westernmost province, has received nearly all its oil from the pipeline since 1954.

The 300,000 barrel a day line has been overbooked solidly since late 2010, according to the filing, and access has been made more difficult for spot shippers since early this year.

That is when about 50,000 bpd of the capacity was reserved for firm service shippers seeking access to harbor facilities, from which the crude could be shipped to Asia.

"That certainly was a contributing factor, and that is part of the growing number of shippers from outside of B.C. accessing the pipeline, which is creating historically high volume requests because of the demand on that Alberta product," Chevron spokesman Ray Lord said.

Crude traders said they expect the board to grant the request from the important domestic refinery, especially as Canada's oil industry seeks to dramatically boost exports of oil sands-derived crude from the West Coast.

Kinder Morgan has proposed a $4.1 billion expansion that would more than double the capacity of Trans Mountain as producers want to reach lucrative new markets in the Pacific Rim, but that would not be in service before 2017.

"This expansion plan will enable all existing and new customers to get the capacity that each requires to carry on with their business, including Chevron," Kinder Morgan said in a statement describing Chevron as "a long-standing and important customer."

Being designated as a priority destination would rank the 55,000 bpd Burnaby refinery behind the firm shippers and ahead of the spot customers in terms of access to capacity.

Early this year, the union representing workers at the Vancouver-area refinery said it feared for the fate of the plant as crude got more difficult to get. Since last October, Chevron has received monthly crude volumes of between 29,500 bpd and 35,000 bpd.

Besides the Burnaby facility and the harbor, the pipeline also supplies refineries in Washington state.

At times in the 18 months, apportionment, or the amount by which shipper nominations are reduced due to overbooking, has exceeded 70 percent.

Lord said the company has been investing in facilities to increase deliveries by truck and is examining getting crude by rail.

"Even if we are able to fully utilize those other modes of transportation, they really can't compensate for the apportionment we've been experiencing," he said.

(Reporting by Jeffrey Jones; Editing by David Gregorio)

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