* Enbridge, Enterprise to more than double Seaway Pipeline
* The plan would add 450,000 bpd to the Seaway system
* Enbridge to also increase size of Flanagan South Pipeline
* New lines to narrow price oil price differentials in
CALGARY, Alberta, March 27 Enbridge Inc
and Enterprise Products Partners LP will more than
double capacity of the Seaway Pipeline and expand another line
from Illinois to ship more crude oil out of the glutted U.S.
The companies said late on Monday they will invest more than
$2 billion in expanding the U.S. pipeline network after securing
sufficient customer commitments for shipping a growing surplus
of crude in the U.S. Midwest to refiners along the Gulf Coast.
The projects, when completed by mid-2014, should help end
the glut of landlocked U.S. crude that has driven the price of
U.S. benchmark West Texas Intermediate crude below the price of
European Brent crude by as much as $28 a barrel.
Fast-rising supplies of crude from Canada's oil sands and
the U.S. state of North Dakota have inundatd the U.S. Midwest,
distorting global oil markets. The deep regional crude oil
discount that has padded profits for Midwest refiners like
Along with a handful of other lines underway, including the
southern leg of TransCanada Corp's Keystone XL, nearly
2 million barrels a day (bpd) of new pipeline capacity will
ultimately be ready to ship inland crude south, according to
Simmons & Co. analysts.
The expansion would add 450,000 barrels per day (bpd) of
capacity to the Seaway system, raising its capacity to 850,000
bpd by mid-2014, Enbridge said in a statement. The companies
agreed to reverse the Seaway line last year, allowing it to pump
crude from the Cushing, Oklahoma, oil hub to the Texas coast.
The company also plans to increase the size of its Flanagan
South Pipeline from Flanagan, Illinois to Cushing to a diameter
of 36 inches, from the originally planned 30-inch line. It will
have an initial capacity of 585,000 bpd and can be expanded to
800,000 bpd with additional pumps to meet rising production from
Canada's oil sands and North Dakota's Bakken field.
The estimated cost of the Flanagan line would increase to
$2.8 billion from $1.9 billion. Enbridge's share of the cost of
the Seaway pipeline twin line and extension is expected to be
about $1 billion.
The companies will also extend the Seaway line from Houston,
Texas, to the refining hub of Port Arthur/Beaumont.
The expanded route, which the companies had signaled earlier
this year with an "open season" during which they could test
customer demand, will compete with the 700,000 bpd southern leg
of Keystone XL line, slated to be complete in 2013.
Unlike the northern Canada-to-U.S. route for Keystone XL,
however, these lines will not be subject to a State Department
review for approval.
The environmental groups that united to block the full
Keystone XL project have not so far voiced major objections to
the of projects. That may change, as their opposition to
importing rising volumes of crude from the tar sands of northern
Alberta remains firm and they look to regulators to block
approvals for the two lines.
The southern leg of Keystone XL "is still going to be a tar
sands pipeline and Seaway also appears to be oriented to tar
sands," said Anthony Swift, an attorney at the Natural Resources
Defense Council. "All the safety risks ... the spill risks
appear to be present."
U.S. President Barack Obama last week pledged to accelerate
approval of the southern leg of the Keystone XL pipeline,
seeking to deflect criticism from political opponents who said
his rejection of the full project helped drive up gasoline
Seaway is the first project on the drawing boards to
alleviate that glut, which last year caused a record gap between
U.S. crude and the European benchmark Brent.
U.S. crude's discount to Brent hit a record near $28 in
October. The spread is now around $18 a barrel,
enough to make it economically profitable to ship oil by barge
or rail, more costly alternatives to pipelines.
"We're getting back to full liquidity where the cost
differential is roughly equal to the transportation
differential," said Steven Paget, an analyst at FirstEnergy
Capital. "That's never a bad thing."
"We expect the pace of infrastructure development to exceed
production growth in 2013 and 2014, which should reduce
discounts closer to rail transportation costs and pipeline
tariffs," Jeff Dietert, an analyst at Simmons & Co, wrote in a
The reversed Seaway line could be in service at an initial
capacity of 150,000 bpd by June 1, Enbridge said. Additional
pumps and modifications needed to ramp up flow rates to 400,000
bpd will be completed by early 2013.
Separately, Enbridge said the Flanagan South Pipeline will
be constructed along the route of Enbridge's existing Spearhead
Pipeline between the Flanagan Terminal, southeast of Chicago, to
Enbridge's Cushing Terminal in Oklahoma.