* C$2.6 bln for Eastern Access, C$600 mln for mainline
* Canada, North Dakota oil would flow to Eastern refineries
* Adds to Gulf Coast expansion
By Jeffrey Jones
CALGARY, Alberta, May 16 Enbridge Inc
kicked off one of the most sweeping expansions in its history on
Wednesday, a C$3.2 billion ($3.2 billion) series of projects
across its pipeline system aimed at moving western Canada and
North Dakota oil to Eastern refineries and eliminating costly
bottlenecks in the U.S. Midwest.
Enbridge, the largest transporter of Canadian oil exports,
said C$2.6 billion worth of the new work would support a
reversal in flow direction of a pipeline between Sarnia,
Ontario, and Montreal to move Alberta oil sands and North Dakota
Bakken shale oil to refineries that are now captive to foreign
It would also spend about C$600 million expanding its
mainline in Canada and the United States, which now moves more
than 2 million barrels a day, to get more crude into the Chicago
area for shipment South and East. Pending approval, the
expansions could be in service in 2014, the company said.
These are the latest in a raft of proposals to open up new
markets for oil sands-derived crude with production slated to
nearly double this decade. Other initiatives involve moving
large volumes to Texas via TransCanada Corp's
controversial Keystone XL pipeline, and to Asia via Canada's
West Coast on Enbridge's equally contentious Northern Gateway
TransCanada has also proposed moving Canadian crude to
refineries in Ontario, Quebec and the Maritime provinces by
switching one of its natural gas pipelines to oil service.
"The timing is driven by what is really a pretty significant
change and a very fast change in the supply and demand
fundamentals on this continent," Al Monaco, Enbridge's president
and incoming chief executive, told Reuters.
"Basically, you've got a massive increase in oil sands and
shale oil volumes, which is totally different from just two
years ago when people thought we were in decline. A lot of that
increase is for light oil."
The surging supplies have led to a glut in the U.S. Midwest
and Midcontinent regions and depressed prices for the North
American oil against world crudes, chewing into corporate
returns and the revenues of governments such as Alberta's.
Part of the aim with expansion of existing infrastructure is
to avoid the lengthy regulatory reviews and environmental
battles that have led to delays Keystone XL and Northern Gateway
because there would be no need to acquire new rights-of-way
across lands, Monaco said.
The new plans are in addition to Enbridge's expansions in
the U.S. Gulf Coast region, including the reversal of the Seaway
pipeline between Cushing, Oklahoma, and Texas, due to start
draining off a glut of supply at the storage hub this month.
Anticipation of that project has already helped to shrink the
discount on North American crudes versus world benchmark Brent.
"That was existing pipeline and it allowed us to hit a
window very quickly when the market wanted that capacity,"
As part of new initiative, dubbed Eastern Access, Enbridge
would expand a pipeline between Michigan and Ohio and reverse
the flow of the 240,000 barrel a day Line 9 between Sarnia and
Montreal back to the West-East direction it was initially
designed for in the 1970s.
The company also said it will bolster the capacities of its
Spearhead and Line 6B pipelines in the Midwest, currently the
largest market for Canadian oil, to get more crude to Line 9.
Much the impetus for the push Eastward is a shift in demand
for various crude crudes, said Steven Paget, analyst with
FirstEnergy Capital Corp.
The retooling of some major U.S. refineries, including
Phillips 66 and Cenovus Energy's Wood River,
Illinois, plant and BP's Whiting, Indiana, facility, is
creating large demand for Canadian heavy crude. They have added
coking units that break the gooey oil down. The light oil they
previously processed, meanwhile, is being displaced.
Those barrels will now be able to flow eastward to such
plants as Suncor Energy's 130,000 barrel refinery in
Montreal, which now runs more pricy imported oil, Paget said.