Enbridge Inc. , in the race to move oil from western Canada and the United States to refineries in the east, has solidified plans to reverse the flow of a key oil pipeline, a plan the energy industry had been pushing for to alleviate the crude glut in the Midwest.
The company on Wednesday earmarked $2.6-billion to its broad effort to move oil to points east for better access to refineries. Most importantly, it said it has secured enough commercial support to reverse Line 9, which will give refineries in Quebec access to crude produced in Alberta, as well as the Bakken formation in North Dakota. Enbridge expects oil to flow eastward in the first quarter of 2014 on Line 9.
The flip is designed to benefit both refiners and producers. Eastern refineries must buy the oil they currently process from offshore sources, meaning they pay richer international prices compared to what oil costs in western Canada. Access to growing production from the west would bring down their costs. For producers, this increased demand is expected to jack up prices for their oil.
Enbridge rival TransCanada Corp. is considering shipping oil rather than natural gas in its Mainline network, also to access eastern refineries. Should TransCanada swap commodities in its pipeline, their projects will be direct competitors.
“A key advantage of our project is from a timing perspective, all we need to do is reverse it,” Al Monaco, Enbridge’s president, said in an interview. “We can attach to these markets quickly.”
Speed, he said, “was critical for the producers and refiners who wanted access to the market.” Refineries in Ontario and Quebec, Enbridge noted, are paying premiums of about $20 per barrel.
It will cost about $300-million to reverse the flow of oil, he said. Suncor Energy Inc. and Valero Energy Corp. have refineries in Quebec. The line can carry 240,000 barrels of oil per day, but Mr. Monaco declined to say how much capacity has been contracted. Enbridge is hosting a so-called open season to allow additional shippers the right to move crude on Line 9 on the same terms as the customers who have already signed on.
In concert with the Line 9 announcement, Enbridge detailed a series of other pipeline projects aiming to alleviate the bottleneck at other refining hubs. It expects to spend about $2.6-billion expanding its access to eastern markets in Canada and the United States. It wants to expand its U.S. mainline system between Flanagan, Ill., and Sarnia; expand its Toledo pipeline, connecting its mainline to Stockbridge, Mich., and delivering to refineries in Toledo, Ohio and Detroit, Michigan. Further, its previously announced plans to reverse another line to in Ontario was detailed as part of its eastern access plans.
The proposals all need regulatory approval.
In Canada, the company also announced plans to expand the Alberta Clipper pipeline and link between North Dakota and the Chicago hub.