Amid political turmoil surrounding the Keystone XL pipeline, two companies announced plans to create a rival system to bring crude oil from Canada and the northern United States to the Gulf Coast.
The move is a response to mounting supply pressure in the north, where advances in drilling technology have heralded an oil boom that has created a glut of landlocked crude with limited transportation options.
Enbridge, Inc., of Calgary, Alberta, and Enterprise Products Partners L.P., of Houston, will collaborate on a $2 billion pipeline from Cushing, Okla., to the Houston area, according to an announcement late Monday. Enbridge will spend $1.9 to $2.8 billion to build another pipeline, from Flanagan, Ill. to Cushing, which would link it to an existing route from Canada and offer access to oil producers in the northern United States. Oil produced in the Bakken shale, including areas in North Dakota and Montana, could be shipped through the pipeline.
The pipelines don’t require the same federal approval as Keystone XL because they will not cross national borders. TransCanada’s plan to build its Keystone XL pipeline to bring oil from Canada to the Gulf Coast was rejected by the Obama administration because it said it did not have enough time to review the plan before a deadline set by Congress.
The Flanagan South pipeline, which will make up the northern leg of the announced pipeline system, will be 36 inches in diameter and have capacity of 585,000 barrels a day of oil when it is completed, likely in mid-2014, according to Enbridge. It will run alongside another existing pipeline.
Enbridge and Enterprise jointly own the Seaway, a pipeline that has moved oil from the Houston area to Cushing, but the partners are working to reverse the flow to carry products south. The new line would run parallel to the existing one and would create a combined southward capacity of 850,000 barrels a day of oil from Cushing to the Gulf Coast, Enbridge CEO Patrick D. Daniel said in the announcement.
“Enbridge’s Gulf Coast access projects give Bakken and western Canadian producers timely, economical and reliable options to deliver a variety of crudes to refinery hubs throughout the heart of North America and now as far as the Gulf Coast,” he said.
Currently, oil produced in the northern areas that are not accessible by substantial pipeline capacity is selling at a substantial discount to world crude.