Seaway II Pipeline's Pump Capacity Nears Completion, Start-Up Expected in October

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Researched by Industrial Info Resources (Sugar Land, Texas)--The 450,000-barrel-per-day (BBL/d) Seaway II pipeline, owned and operated by Enterprise Products Partners LP (NYSE:EPD) (Houston, Texas) and Enbridge Incorporated (NYSE:ENB) (Calgary, Alberta), was expected to be completed in February; however, it was pushed out to June, according to Industrial Info's data. Plans have changed once again, as the new pump capacity to bring Seaway II online is very nearly completed. Seaway II is now not expected to be brought online until October 2014.

Permits needed to get Alberta oil sands crude oil across the U.S.-Canada border have caused delays, leaving Seaway II with no oil to ship, and thus no reason to begin operations. Specifically, a major source of crude oil, Enbridge's Line 67, was supposed to see a 120,000-BBL/d expansion be brought online at roughly the same time as Seaway II, but its start-up has been delayed in conjunction with the second phase of that expansion in mid-2015.

As one of three major pipelines offering Gulf Coast access to Cushing storage terminals, Seaway II is on a lot of people's minds. The glut of oil at Cushing was a big issue, as more oil was flowing into the "Pipeline Crossroads of the World" and on southward to supply Gulf Coast refiners. However, according to EIA data, the stockpiles at Cushing have been on a steady downward trend since January 2013.

Crude oil stockpile numbers for March 2014 were just more than half of those in March 2013, and are lower than any other month since October 2009. This also helps to explain the lack of oil to start up Seaway II.

Getting oil across the U.S.-Canadian border has proven to be a regulatory nightmare for shippers. TransCanada Corporation's (NYSE:TRP) (Calgary) planned 500,000-BBL/d Keystone XL (KXL) pipeline project is a testament to that difficulty, as it has drawn huge amounts of resistance from environmental groups and the U.S. federal government. Enbridge seemed to have found a way to fly under that radar by expanding existing pump facilities on an existing pipe in order to get a similar amount of oil across the border. These expansions were part of the Mainline Enhancement project--specifically, the Alberta Clipper expansion, or Line 67 as it is known in the U.S.

Phase I was set to deliver an additional 120,000 BBL/d of oil across the border by July 2014, with Phase II aiming to deliver another 230,000 BBL/d in July of next year. Phase I has been delayed as resistance to Enbridge's plans has grown and impacted the regulatory processes in Minnesota. Presumably, Seaway II was relying on this extra capacity from Canada to underpin its operation; however, with its delay and the continuously shrinking stockpile at Cushing, it seems the new pipeline must sit idle until October, when some new capacity is expected to be routed its way.

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