Completion of a pipeline system able to move large volumes of Western Canadian crude oil from Alberta to the U.S. Gulf Coast—the one not named Keystone—merited a January celebration at the Jones Creek terminal near Freeport, Texas, with numerous salutes to international cooperation and competition in free markets.

“Make no mistake about it: Canadian crude is in the game here on the Gulf Coast, and we will compete for space against waterborne imports,” said Al Monaco, president and CEO of Calgary-based Enbridge Inc. “For refiners, it provides a desirable and secure source of feedstock for the expansion of heavy capacity that they have had to make. Bigger picture: Canadian crude in the Gulf means energy security for North America. And when supply and demand are connected with the lowest-cost transportation by pipelines, that can only mean one thing—it’s good for consumers.”

The system is a joint venture of Enbridge and Houston-based Enterprise Products Partners LP. It incorporates Enbridge’s new 593-mile, $2.8 billion Flanagan South Pipeline, with capacity of 600,000 bbl/d from Illinois to the Cushing, Okla., hub, and Enterprise’s newly looped Seaway Pipeline, which moves up to 450,000 bbl/d crude from Cushing to the Jones Creek terminal on the Gulf Coast. The project more than doubles capacity of the Seaway system to about 850,000 bbl/d. The 65-mile lateral from Jones Creek to the ECHO terminal in Houston was completed in January, and the 100-mile lateral between ECHO and Beaumont/Port Arthur was completed last December.

Low oil prices will likely keep the new line at half-capacity for the near term, but did not appear to concern the partners, who emphasized the long-term nature of investments like these.

“These are very tough times for oil producers and margins are really thin,” Monaco acknowledged. “That’s exactly the time to make sure that you’re accessing the best markets and maximizing that price. Getting into the right markets is even more critical in this price environment.”

Jim Teague, executive vice president and COO of Enterprise, agreed.

“We’ve drained Cushing, and until it replenishes—and it looks like it’s in the process of doing that—Flanagan South is going to help the Pony Express [Pipeline],” he said. “We are close to fully subscribed, if not fully subscribed, and 10 years is a long time. I think before it’s all said and done that Canada’s going to produce a heck of a lot more crude, as are some of the basins here in the U.S. This whole North American continent is not going to be denied as far as natural resources are concerned.”

Flanagan South is fed by an existing pipeline and neither of the new pipes crosses the U.S.-Canadian border, avoiding the need for federal approval, unlike Keystone XL.

Comments