Maybe It's Time, Part 4 - Enbridge's Mainline Crude System Advances Toward a New Era

The recently mandated reduction in Alberta crude oil production has helped to ease takeaway constraints out of Western Canada, but only temporarily. Worse yet, it’s unclear how long it will take to add new takeaway capacity from challenged projects like the Trans Mountain Expansion Project or Keystone XL. In the midst of all this trouble and uncertainty, Enbridge is pursuing a potentially controversial plan to revamp how it allocates space — and charges for service — on its 2.8-MMb/d Mainline system, the primary conduit for heavy and light crudes from Western Canada to U.S. crude hubs and refineries. Today, we begin a series on the company’s push to shift to a system that would allocate most of the space on its multi-pipe Mainline system to shippers that sign long-term contracts.

Enbridge’s 2.8-MMb/d Mainline system from Alberta to the U.S. Midwest has been running close to full, as have the other crude oil pipelines out of Western Canada. The Mainline is a unicorn among these pipes, however, in that none of its capacity — zilch — is under long-term contract. Instead, under Enbridge’s almost nine-year-old Competitive Tolling Settlement (CTS), shippers each month submit nominations stating the volumes of crude they would like to transport the following month on various elements of the Mainline system, then hope they get what they need when the available capacity is divvied up. In an effort to give producers and refiners the pipeline-capacity certainty they say they want — and to optimize the efficiency of the Mainline’s operation — Enbridge has been working with shippers on a CTS-replacement plan that would commit as much as 90% of the capacity on the pipeline system to shippers who enter into long-term contracts. Today, we continue this blog series with a look at how the prospective “priority access” capacity-allocation system is shaping up, how it might affect planned pipeline projects, and how it may facilitate the transport of a lot more crude from Alberta to the U.S. Gulf Coast.

By mid-year, Enbridge plans to initiate an open season for long-term, firm capacity on its existing 2.8-MMb/d Mainline crude system from Western Canada to the U.S. Midwest starting in mid-2021. Securing a sure way for Western Canadian heavy-crude producers to export crude from the Alberta oil-sands region — combined with additional southbound pipeline capacity from the Midwest to the Gulf Coast, would give Texas and Louisiana refineries an alternative to using overseas imports and would boost crude volumes being shipped from existing and planned export terminals. Today, we conclude our series on the pipeline’s contracting plans with a look at the impact of a straight-shot, joint-tariff pipe as well as joint pipe-barge transportation solutions from the oil sands to the Gulf Coast.