The Enbridge SAX and East Gulf Pipeline Band – Music to Canadian Crude Producer’s Ears!

Two separate companies launched open seasons for complimentary pipelines last week (June 5, 2013) that would offer at least 420 Mb/d of capacity to ship heavy Canadian crude to the Gulf Coast by early 2016. Energy Transfer Partners proposes to reverse part of the Trunkline natural gas pipeline to ship crude. Enbridge propose to build a pipeline to link the Trunkline reversal directly to their Lakehead system. Today we explore the rationale behind these projects.

We have written a number of blogs recently about pipeline conversions from natural gas to crude oil. The demand for these conversions comes as North American energy systems are being re-plumbed to accommodate rising crude oil production and new sources of natural gas closer to market. That leaves some gas pipelines with free capacity to convert to crude shipment. We first presented a general discussion of the conversion process (see One Way or Another). Then we wrote a mini series on the Kinder Morgan Freedom pipeline proposal to convert a gas pipeline in West Texas to carry crude to California (see Is the Price of Freedom Too High Part 1 and Part 2). That pipeline failed to attract sufficient support from refiners on the West Coast for Kinder Morgan to move ahead. Last week in another mini series we covered TransCanada’s plans to convert part of its natural gas Mainline to crude oil in “What Becomes of the Empty Pipelines” Part 1 and Part 2. This time we look at the Open Season that Energy Transfer Partners launched last week for their proposed conversion of part of the existing Trunkline gas pipeline into the Eastern Gulf Crude Access pipeline (EGCAP). The proposed Energy Transfer pipeline is being pitched at exactly the same time as a complimentary project operated by Enbridge that would link the latter’s huge Lakehead system running from Western Canada to Flanagan, IL with EGCAP in Patoka via another new pipeline called the Southern Access Extension Pipeline (SAX).

The Energy Transfer EGCAP project plans to convert approximately 574 miles of existing 30-inch diameter pipeline that is part of the Trunkline natural gas Interstate system. Trunkline is a 3,000 mile system fed by Gulf Coast supplies that delivers 1.5 Bcf/d of natural gas to Midwest and East Coast markets including some of the nation's largest utility and industrial gas users in Chicago, Michigan, Memphis and St. Louis. Energy Transfer submitted an application to the Federal Energy Regulatory Commission (FERC) in July 2012 to abandon the gas pipeline that will serve EGCAP. By converting only part of Trunkline to crude oil, Energy Transfer will still have capacity to ship 1.0 Bcf/d of natural gas. In the company’s submission to FERC they cited declining use of Trunkline to move gas in light of increased volumes reaching Midwest markets from the Rockies Express, Western Canada and new shale production in the East (e.g. the Marcellus basin).

The EGCAP project proposes reversing the pipeline direction so that it runs north to south, with an initial 420 Mb/d of crude oil capacity from Patoka, IL, to St James, LA and then potentially a future extension to the onshore LOOP terminal facility at Clovelly, LA. (see Thrown for a LOOP Part 1 and Part 2). If supported by shippers and subject to approval, the EGCAP system will come online in 2Q 2016. The associated Enbridge SAX project will be a 165-mile, 24-inch diameter 800 Mb/d crude pipeline from the Enbridge Lakehead system at Flanagan, IL to Patoka. Sax has already had one successful open season between December 2012 and January 2013 and is now soliciting additional shippers to move crude onto the EGCAP system that is scheduled online in 2Q 2015. The 2.5 MMb/d Enbridge Lakehead system carries Western Canadian heavy crude as well as Saskatchewan and North Dakota light crude East to Eastern Canada and South to Flanagan, IL where it meets the 193 Mb/d Spearhead pipeline to Cushing, OK. The map below shows the Lakehead system north of Flanagan, the proposed SAX pipeline between Flanagan and Patoka, the Trunkline section that will be converted between Patoka and Boyce, LA (solid blue line on the map) and the new pipeline section to be built between Boyce and St. James, LA.

Source: Enbridge Presentation May 2013 (Click to Enlarge)

In addition to barrels from the Lakehead system via SAX, the EGCAP pipeline can be fed from several other pipelines that connect into Patoka. These include the TransCanada Keystone pipeline (the existing pipe not the yet-to-be-built contentious one), the Mustang Pipeline from Chicago and the Woodpat pipeline from Wood River. The Woodpat pipeline provides additional access for crude from the Rockies via the Spectrum Platte Express pipeline. The map below shows the relative position of these pipelines.

Source: EGCAP Open Season (Click to Enlarge)

At the Louisiana end, the proposed EGCAP pipeline will provide shippers with access to over 3 MMb/d of refining capacity along the Mississippi River, in the vicinity of St. James and along the Mississippi and Alabama Gulf Coast. Enbridge estimates that these refineries are split roughly 38 percent heavy crude and 62 percent light crude processing capacity.

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