Now that Enbridge is increasing Canadian heavy crude volumes on its expanded Line 3 and South Access pipelines, the company announced on November 5 that it is next aiming to increase the capacity of its systems that connect to the coast. the Gulf of Texas, including the potential construction of a pipeline from the Houston to its new crude export hub at the Port of Corpus Christi.

Enbridge expects a major procurement regulatory decision in late November for its main crude pipeline system to the United States, and expects to provide more details on future projects at its December investor event, including potential capacity expansions at its southern access extension, Flanagan South and Seaway pipelines, the company said in its third quarter earnings call.

Enbridge is coming off a remarkable October which saw the start of its Line 3 replacement project, which increased capacity from 390,000 bpd to 760,000 bpd in the Alberta oil sands at Superior, Wisconsin, and its Wisconsin to Illinois Southern Access Expansion, with capacity increasing from 996,000 bpd to 1.2 million bpd. Enbridge also closed in mid-October its $ 3 billion acquisition of the Ingleside Energy Center, which is the United States’ largest crude export hub by Corpus Christi, Texas.

“The return of the line at full capacity prepares us for further expansion to the Gulf Coast of the United States,” said Enbridge CEO Al Monaco of the Line 3 extensions and southern access on the mainline, promoting “full access for Canadian heavy goods vehicles to the Gulf of the United States.” Coast ”as the world continues to recover from the ongoing pandemic.

Monaco touted the demand for Canadian crude from USGC refiners configured to run barrels heavier than U.S. shale, as well as overseas markets that could import Canadian crude from Houston-area markets via tankers and oil companies. VLCC.

USGC refining margins strengthened in the third quarter, with March crude coking margins averaging $ 14.35 / bbl, down from $ 11.49 / bbl in the second quarter, according to data from S&P Global Platts Analytics.

Enbridge is considering a series of optimization projects to increase crude capacity – using more drag reducing agents and pumping stations – such as adding an additional 200,000 bpd to the Mainline; 100,000 bpd at the southern access extension; 250,000 bpd to South Flanagan; and 200,000 bpd at Seaway, which extends to the markets of Freeport, Texas and Houston. The sizes of capacity extensions are all subject to change.

“We have a batting order of aligned – profitable – expansions,” said Colin Gruending, president of Enbridge Liquids Pipelines, during the earnings call.

“Potentially, later on, we could connect the Seaway to Corpus,” Gruending said. “So you have an idea of ​​what we’re trying to build here. “

Enbridge’s new Ingleside Energy Center exports crude from the Permian Basin and Eagle Ford Shale, but does not have easy access to Canadian barrels or the storage and pricing center in Cushing, Oklahoma.

Enbridge executives also said they remain committed to partnering with Enterprise Products Partners to build the crude export seaport oil terminal, called SPOT, off the Houston Ship Channel to better accommodate VLCCs without requiring reverse relief.

Various routes

With the capacity to ship over 3.1 million barrels / day over 8,600 miles, Mainline is by far the largest transporter and exporter of crude in Canada, bringing supplies from the Alberta oil sands to markets in Canada. refining in Ontario and the US Midwest – and further to the Cushing hub and to the USGC via Flanagan South and Seaway, respectively.

Mainline volumes averaged 2.67 million b / d in the third quarter – up from 2.56 million b / d in the same quarter in 2020 – and are expected to average 2.95 million b / d in the fourth quarter and stay on track at nearly $ 3 million on average. b / d in 2022, Enbridge said.

From Illinois, the Southern Access Pipeline connects to Enbridge’s Flanagan South Line that carries crude to Cushing, and the Seaway pipeline system extends from Cushing to the Texas Gulf Coast.

There is also the 300,000 bpd Southern Access Extension pipeline that runs from Flanagan to Patoka, Ill., Which will access the Capline pipeline reversal system that flows from Patoka to the coast of the Gulf of Louisiana. Capline will start on January 1 at approximately 100,000 bpd of Canadian crude before capacity is increased over time.

Enbridge also co-owns Energy Transfer’s Bakken pipeline, including the recently expanded Dakota Access pipeline, to Patoka and Nederland, Texas.

But, before Enbridge unveils more specific plans, Canada’s energy regulator must decide by the end of November whether it will approve Enbridge’s multi-year fight to change the nomination system. Mainline’s monthly as a “common carrier” in long-term commitment contracts with only 10% of the capacity reserved for cash shipping. Enbridge argues that the move is necessary for volume certainty and less month-to-month volatility, as well as for a higher price for Canadian crude.

The regulatory decision will help Enbridge finalize decisions on the scope and timing of its next projects.

Enbridge argued that basing Canadian transfer barrels on pipeline economics – not more expensive crude-by-rail exports – should narrow the spreads and strengthen Western Canadian Select barrels by around $ 5 / bbl. which would lead to increased production and mainline expansions.

With the Line 3 replacement project now live, Platts Analytics sees the price of WCS staying within the economic range of the pipeline and not having to falter to meet the additional cost of rail shipments. Platt’s Analytics predicts 1 million barrels per day of Canadian production growth over the next decade, which means further pipeline expansions will eventually be required even after the Trans Mountain pipeline expansion in Canada is expected to grow. ‘to be completed by the end of 2022, in the years to come.
Source: Platts

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