(Reuters 3/29/2012) - Even as big U.S. oil pipelines invest billions of dollars to ship booming oil production south from Canada and North Dakota, a new race is underway in the opposite direction.
Two of the country's biggest pipelines, both now underutilized, are competing to pump a special type of ultra light oil from the Gulf Coast to the Midwest, betting on growing demand from Canadian producers for the "diluent" necessary to get their heavy oil sands bitumen flowing to refiners.
The race between the Capline and Explorer lines, which may play out over years rather than months, is the latest example of how fast-growing inland oil production has roiled the U.S. market, forcing key parts of the nation's oil infrastructure to adapt -- or face obsolescence.
It is fueled by forecasts that demand for diluent from Canadian oil producers will quadruple in just over a decade.
Meanwhile Capline has been boosting throughput with diluent shipped from Texas to the Louisiana hub by rail, three trade sources said.
"A non-trivial amount is coming from the Eagle Ford, getting to St. James, loaded onto Capline, hits Southern Lights and goes to Alberta," said Rusty Braziel, who runs RBN Energy.
By Bruce Nichols
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