Maybe It's Time, Part 3 - How Enbridge's Mainline Shift May Boost U.S. Crude Exports

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. 

This is Part 3 in our series on Enbridge’s plan to replace its soon-to-expire Competitive Tolling System (CTS) on its Mainline system with a contract-carriage approach under which the bulk of the system’s capacity will be dedicated to shippers who enter into contracts of up to 20 years. As we said in Part 1, crude production in the Western Canadian Sedimentary Basin (WCSB) has increased by two-thirds in the past decade — from ~3 MMb/d to ~5 MMb/d — with virtually all incremental output available for export. Pipeline capacity from the WCSB to the U.S. has been rising too — from ~2.7 MMb/d nine years ago to ~4 MMb/d now, including about 2.8 MMb/d on the Enbridge Mainline — but not quickly enough to keep up with production gains. We also explained that the Mainline isn’t just the biggest crude pipeline system out of the WCSB, it’s also the only major line whose service is 100% “uncommitted” — that is, it has no capacity under long-term contracts with shippers.

In Part 2, we discussed Enbridge’s ongoing negotiation with shippers to replace the CTS that has been in place since July 1, 2011, with a priority-access plan that would kick in when the CTS expires on July 1, 2021. Under the prospective plan, details of which are still being worked out, shippers would enter into contracts (again, with terms of up to 20 years) for pipeline capacity between certain points on the multi-pipe Mainline system. Up to 90% of the system’s long-term capacity would be up for grabs; with the balance of the capacity (at least 10%, and possibly more) reserved for spot and/or new shippers.

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