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Enbridge to invest $6.2B in pipeline expansions for light oil from North Dakota and Canada

10 December 2012

Enbridge Inc. will proceed with a $6.2-billion program of pipeline expansions to carry an additional 400,000 barrels per day (bpd) of light oil from North Dakota and western Canada to refinery markets in Ontario, Quebec and the US Midwest.

LomapMap.ashx
Program projects. Click to enlarge.

The Light Oil Market Access Program will provide increased pipeline capacity on Enbridge’s North Dakota regional system; further expand capacity on the US mainline system; enhance Canadian mainline terminal capability; upsize the Eastern Access Program; and provide additional access to US Midwestern refineries. Specifics include:

  • North Dakota System Expansion and Extension. Construction of a 965-kilometer (600-mile) 24-inch diameter line (Sandpiper Project) from Beaver Lodge, North Dakota, to the Superior, Wisconsin, Terminal. Will increase Bakken takeaway capacity by 225,000 bpd. Estimated capital cost of this project is approximately $2.5 billion.

  • Eastern Access Capacity Expansion. Enbridge has secured sufficient commercial support to proceed with additional aspects of the previously announced $2.7 billion Eastern Access Program. This entails full reversal and capacity expansion of Line 9 to 300,000 bpd and US mainline system expansions—through the addition of pumping horsepower and increased terminal capability at existing sites—between Flanagan, Illinois, and the border near Sarnia, Ontario.

    The upsized Line 9 reversal and supporting US mainline expansion capital brings the total Eastern Access Program estimated cost to $3.2 billion including the $0.2 billion Toledo Pipeline expansion.

  • Southern Access (Line 61) Extension Pipeline. Construction of a 165-mile, 24-inch diameter Southern Access Extension Pipeline from Flanagan to Patoka. Initial capacity of 300,000 bpd at an estimated cost of $0.8 billion.

  • US Mainline System. Based on increased availability of western light oil supplies, and attractive pricing relative to US Gulf Coast sourced supply, Chicago-area refineries are shifting to the west as their primary light oil supply source.

    This project entails the construction of a 122-kilometer (76-mile), up to 36-inch diameter twin of the existing Line 62 (Spearhead North), with an initial capacity to 570,000 bpd. Estimated cost is $0.5 billion. Capacity expansion of Line 61 to its full 1,200,000 bpd potential has an estimated total cost of $1.5 billion.

This $6.2 billion investment rounds out our suite of major crude oil new market access initiatives for North American markets. It follows on the heels of our $2.7 billion Eastern Access Program announced in May, and our $5.8 billion upsized US Gulf Coast Access Program announced in March, including a number of projects adding capacity to the existing mainline system announced in May. These market access initiatives reflect changing North American supply and demand fundamentals.

—Al Monaco, President and CEO, Enbridge Inc.

The Light Oil Market Access Program responds to significant recent developments with respect to supply of light oil from US north central formations and western Canada, as well as refinery demand in the US Midwest and eastern Canada.

On the supply side, production from the Bakken formation centered in North Dakota has grown from 200,000 bpd to 700,000 bpd in the last five years with potential to expand to 1,200,000 bpd or more in the next five years, if transportation access to refinery markets is available. Additional growth in light crude production of 100,000 bpd or more is also anticipated from the application of the latest recovery technologies to the Cardium and Viking formations in Alberta, Canada. Supply from these areas has become increasingly attractive to refineries in the US Midwest and eastern Canada compared to much more costly alternative sources, Enbridge notes.

The individual projects within the program are targeted to be available for service at varying dates from 2014 to early 2016. Shippers have provided support for each of the individual projects either in the form of capacity commitments or support for the regulatory approval and commercial framework of the North Dakota and Mainline system projects, including support for the regulatory approval of the North Dakota expansion commercial terms pending before the Federal Energy Regulatory Committee (FERC). The terms approved by shippers for the US mainline system expansion projects include surcharges to be added to Enbridge’s Competitive Tolling Settlement (CTS) international joint toll. The program will require various regulatory approvals and permits.

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Comments

With all these pipelines changes, Eastern Canada and part of North Eastern USA will have access to much cheap Alberta Oil ($85-$90/barrel) instead of $110-$115/barrel currently paid for imported oil. Secondly, Canada's trade balance will be further improved.

By 2016/2017, when the Trans-Mountain pipelines are built, export to Asia will gradually increase to 1,000,000+ barrels/day and this could signal the end of discounted (up to -25%) low price for Alberta oil. However, it will further improve Canada's trade balance.

Alberta's oil production will be progressively raised from about 3.5M barrels/day to 6.0M barrels/day to feed those new markets.

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