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Enbridge says proposed Gulf pipeline has advantages over Keystone X

CALGARY — Enbridge Inc. says its proposed oil pipeline to the U.S. Gulf Coast provides more flexibility to customers than the controversial Keystone XL proposal from rival TransCanada.
Advocate Staff

CALGARY — Enbridge Inc. says its proposed oil pipeline to the U.S. Gulf Coast provides more flexibility to customers than the controversial Keystone XL proposal from rival TransCanada.

“One of the issues with Keystone XL is that is passes past no refineries of any size that can run heavy crude until it hits Port Arthur, Texas, and that removes optionality,” said Stephen Wuori, Enbridge’s president of liquids pipelines.

But U.S. producers who use Enbridge’s Wrangler line, via pipelines further north that connect to it, can access heavy oil refineries in Chicago and Minneapolis, Wuori told an investor conference.

Enbridge (TSX:ENB), based in Calgary, announced last week that it was teaming up with Enterprise Products Partners LP to build an 800,000 barrel per day line between an oversupplied storage hub at Cushing, Okla., to the Gulf of Mexico.

Both companies had plotted their own Cushing-to-Gulf lines and decided to join forces when neither project got enough traction independently.

The main problem they are trying to solve with the line is the massive supply glut at Cushing, which Wuori called a “pricing sewer” for North American light crude.

But Wrangler can also pull heavier crude from Alberta south through a new pipeline Enbridge plans to build from Flanagan, Ill., to Cushing that is not part of the Enterprise joint venture.

A so-called “open season” to attract bids from potential shippers on Wrangler began Monday and is set to run for about a month. Wuori said it’s not clear yet how much of the pipeline’s capacity needs to be snapped up in order for it to go ahead.

Despite the fact that Enbridge and TransCanada (TSX:TRP) are rivals, Wuori said Enbridge is rooting for its competitor to win a permit to build Keystone XL, which has been the subject of intense opposition over its potential environmental impacts.

Unlike Keystone XL, Wrangler would not need approval from the U.S. State Department since it would not cross an international border. It would also cost much less: $1 billion to $2 billion instead of Keystone XL’s $7 billion.