Canada-based Enbridge to acquire ConocoPhillips’s interest in Seaway Crude Pipeline System for US$1.15B; reversing to carry oil to Gulf Coast
|Enbridge’s current liquids pipelines (not showing Seaway or proposed Flanagan South and Wrangler). Click to enlarge.|
Canada-based Enbridge Inc. has entered into an agreement to acquire ConocoPhillips’ 50% interest in the Seaway Crude Pipeline System for US$1.15 billion. On closing, Enbridge will become joint owner of the pipeline with Enterprise Products Partners LP. Enterprise will continue to operate the pipeline system and storage facilities.
Enbridge and Enterprise agreed to reverse the direction of crude oil flows on the Seaway pipeline to enable it to transport oil from Cushing, Oklahoma to the US Gulf Coast. Pending regulatory approval, the line could operate in reversed service with an initial capacity of 150,000 barrels per day by second quarter 2012.
Following pump station additions and modifications, anticipated to be completed by early 2013, the capacity of the reversed Seaway Pipeline will be up to 400,000 barrels per day in mixed service. Enbridge and Enterprise expect that the reversed Seaway pipeline will be fully contracted. The partners anticipate conducting an open season to validate shipper support for an expansion of Seaway, through looping or twinning.
The 670-mile (1,078-kilometer) Seaway Crude Pipeline System (SCPS) includes the 500-mile (805-kilometer), 30-inch diameter Freeport, Texas to Cushing, Oklahoma long-haul system, as well as the Texas City Terminal and Distribution System which serves refineries in the Houston and Texas City areas. SCPS also includes 6.8 million barrels of crude oil tankage on the Texas Gulf Coast and four import docks at two locations.
Enbridge is also considering two new pipelines in the US: the Flanagan South pipeline would carry Canadian crude from Chicago to Cushing; the Wrangler pipeline would carry around 800,000 barrels of oil per day to the Gulf. The company is in the process of gathering commitments for the two. During the company’s earnings call earlier in November, CEO Patrick Daniel said:
...we received significant commitments on both the Flanagan South and the Wrangler segments in the open seasons, and as is always the case with an open season, the commitments include conditions, sometimes some terms, sometimes the rate at which volumes ramp up or whether participants are interested in equity, and we’re currently in discussions with shippers now to accommodate those conditions.
So, it’s a little early for us to give a definitive response...but we expect to conclude those discussions with sufficient volumes to proceed with both segments of the line, but you’re going to have to wait just a little bit longer for us to be able to firm that up.
After reversing the direction that crude oil flows on the 500-mile (805-kilometer), 30-inch diameter, long-haul pipeline, Seaway will deliver crude from Cushing into the Houston-area market by utilizing existing affiliate and third-party pipelines as well as its Texas City local pipeline system. Enbridge and Enterprise plan to build a 45-mile (72-kilometer) pipeline that will link Seaway directly to Enterprise's ECHO crude oil storage terminal located southeast of Houston. This will provide shippers with enhanced connectivity and more efficient transportation to the Houston refining market. Additional investment required by the joint venture partners to reverse the line and construct supporting lateral and related facilities is expected to be approximately $300 million.
The Seaway Pipeline reversal provides an early opportunity to offer Gulf Coast access to midcontinent producers and other crude oil shippers. A Seaway reversal will provide capacity to move secure, reliable supply to Texas Gulf Coast refineries, offsetting supplies of imported crude.—Patrick D. Daniel, President and CEO, Enbridge Inc.