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Researched by Industrial Info Resources (Sugar Land, Texas)--Heavy crude oil from the Alberta Oil Sands have faced chronic bottlenecks in pipeline takeaway capacity since their initial exploitation. New pipelines and expansions to existing ones have helped to alleviate that bottleneck. However, Enbridge Incorporated (NYSE:ENB) (Calgary, Alberta) has recently apportioned crude shipments by 7% on its Line 4 and Line 67 systems, which carry crude oil from Edmonton, Alberta, to Superior, Wisconsin.
Combined, lines 4 and 67 have the capacity to transport over 1.5 million barrels per day (BBL/d) of crude oil, but Line 4 also transports volumes of light and medium crude, which were not affected by the apportionment, ex-Clearbrook, Minnesota. The reason given for the apportionment was high inventories, indicating more volumes are being stored at receipt points, a symptom of a widening contango market where buying oil and storing it in hopes of a price jump incentivizes even more buying and storing. Enbridge is not the only shipper bringing heavy Canadian crude barrels into the U.S., though. Other shippers target other markets, however where one market begins to back up, others are worth scrutiny.
The 7% apportionment of lines 4 and 67 potentially means about 111,000 BBL/d of Canadian crude will not enter the U.S. market. Both pipelines feed Enbridge's 10.2 million-barrel Superior Terminal in the Midwest market. Other pipelines that serve the Midwest region are TransCanada Corporation's (NYSE:TRP) (Calgary, Alberta) 590,000 BBL/d Keystone Pipeline and Spectra Energy's (NYSE:SE) (Houston, Texas) 164,000 BBL/d Express-Platte Pipeline System. Both of these systems deliver volumes to Wood River, Illinois, while Keystone has a leg which delivers into Cushing, Oklahoma, for continuing service onward to Texas refineries. Though neither system is as massive as Enbridge's, in a market that has little wiggle room to accommodate changes in available takeaway capacity, losing even a small system can impact the price of Western Canadian Sour (WCS) crude oil.
Kinder Morgan Incorporated (NYSE:KMI) (Houston) has its 300,000 BBL/d Trans Mountain system which carries WCS westward and south across the border to Washington state, where it can be shipped to west coast refiners. It is the only pipeline to serve the west coast market from Alberta, and is currently fighting to expand its system by nearly 200% through its Trans Mountain Expansion Project (TMEP 890), which would expand the pipeline to 890,000 BBL/d. Other than the above four pipeline systems, WCS reaches its markets via rail, which is up to twice the cost of moving it by pipeline, thus putting pressure on producers in the Oil Sands.
If cross-border pipelines are apportioning capacity due to high inventories, then available storage capacity is likely to be wearing thin. Eventually the market must correct itself in the form of new tanks being added to store more crude oil or inventories being sold off by traders that are currently buying and holding to reduce volumes being stored.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Combined, lines 4 and 67 have the capacity to transport over 1.5 million barrels per day (BBL/d) of crude oil, but Line 4 also transports volumes of light and medium crude, which were not affected by the apportionment, ex-Clearbrook, Minnesota. The reason given for the apportionment was high inventories, indicating more volumes are being stored at receipt points, a symptom of a widening contango market where buying oil and storing it in hopes of a price jump incentivizes even more buying and storing. Enbridge is not the only shipper bringing heavy Canadian crude barrels into the U.S., though. Other shippers target other markets, however where one market begins to back up, others are worth scrutiny.
The 7% apportionment of lines 4 and 67 potentially means about 111,000 BBL/d of Canadian crude will not enter the U.S. market. Both pipelines feed Enbridge's 10.2 million-barrel Superior Terminal in the Midwest market. Other pipelines that serve the Midwest region are TransCanada Corporation's (NYSE:TRP) (Calgary, Alberta) 590,000 BBL/d Keystone Pipeline and Spectra Energy's (NYSE:SE) (Houston, Texas) 164,000 BBL/d Express-Platte Pipeline System. Both of these systems deliver volumes to Wood River, Illinois, while Keystone has a leg which delivers into Cushing, Oklahoma, for continuing service onward to Texas refineries. Though neither system is as massive as Enbridge's, in a market that has little wiggle room to accommodate changes in available takeaway capacity, losing even a small system can impact the price of Western Canadian Sour (WCS) crude oil.
Kinder Morgan Incorporated (NYSE:KMI) (Houston) has its 300,000 BBL/d Trans Mountain system which carries WCS westward and south across the border to Washington state, where it can be shipped to west coast refiners. It is the only pipeline to serve the west coast market from Alberta, and is currently fighting to expand its system by nearly 200% through its Trans Mountain Expansion Project (TMEP 890), which would expand the pipeline to 890,000 BBL/d. Other than the above four pipeline systems, WCS reaches its markets via rail, which is up to twice the cost of moving it by pipeline, thus putting pressure on producers in the Oil Sands.
If cross-border pipelines are apportioning capacity due to high inventories, then available storage capacity is likely to be wearing thin. Eventually the market must correct itself in the form of new tanks being added to store more crude oil or inventories being sold off by traders that are currently buying and holding to reduce volumes being stored.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
