Canadian crude rolling into Gulf Coast refineries

Canadian oil sands crude is now streaming into refineries on the Texas coast at a rate of 100,000 barrels per day, even as environmentalists are attempting to block its southward flow through the Keystone XL pipeline now under construction.

Canadian pipeline giant Enbridge recently increased its shipping of the heavy hydrocarbon after a set of expansions allowed it to start transporting oil from a hub in Cushing, Okla., to the Gulf Coast last year.

Enbridge reached the 100,000-barrel-a-day milestone for the oil sands crude after completing a pipeline expansion last month, Enbridge President and CEO Al Monaco said Tuesday during an interview with FuelFix.

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The company’s Seaway pipeline, which it owns jointly with Houston-based Enterprise Products Partners, has a total capacity of up to 400,000 barrels a day, though the capacity is lower when it transports oil sands crude, Monaco said. The system connects with other pipelines that move oil from Canada and from shale plays throughout the U.S., he said.

Prior to Enbridge’s expansions and changes to its pipeline system, only small amounts of crude from Canadian oil sands made it either by rail or through small pipelines to the world-class refineries along the Gulf Coast that specialize in processing such oil, Monaco said.

The new rush of oil sands crude to the region will help increase output at refineries that “thirst for heavy crude,” he said.

It also will allow oil and gas companies to ship and sell their products for higher prices. Landlocked oil in Canada and North Dakota sometimes sells for as much as $40 a barrel less than oil regularly purchased by Gulf Coast refineries, Monaco said.

Al Monaco, president and CEO of Enbridge, Inc., talks to FuelFix about the company's pipeline projects. ( Brett Coomer / Houston Chronicle )

Refineries want North American crudes “because their alternative is offshore imports,” he said.

“If you look at the configuration of the Gulf Coast refineries, a lot of it is heavy oil capacity,” he said. Oil companies characterize oil sands material as a heavy crude. It’s composed of a solid hydrocarbon-bearing material, bitumen, that must be heated and diluted to move through pipelines.

The availability of a large quantity of Canadian diluted bitumen, combined with a large amount of Gulf Coast refining capacity, has resulted in “the perfect marriage” of supply and demand linked by pipelines like the Seaway, he said.

Read more: Keystone XL won’t affect climate, TransCanada says

“Traditionally they’ve gone to the Venezuelan market,” he said of the coastal refineries. “They’ve gone to Mexican crude to supply their heavy oil refining capacity, and remember that if you are a refinery that has invested billions of dollars in heavy oil capability, then that’s the kind of feedstock that you want.”

The Seaway pipeline, which runs from Cushing to Freeport, formerly moved oil north, but Enterprise and Enbridge spent $300 million to reverse its flow because booming production from shale and Canadian oil sands created a glut of landlocked oil in the middle of North America. The reversal also incorporated modifications that increased the Seaway’s capacity from 150,000 barrels a day to 400,000 barrels a day.

Enbridge and Enterprise also are collaborating on a new $2 billion pipeline that will run parallel to the existing Seaway line and will add another 450,000 barrels of southbound oil shipping capacity from Cushing.

Environmentalists have opposed the transport of diluted bitumen from Canada. Activists have succeeded in slowing construction of Trans-Canada’s Keystone XL pipeline by disrupting construction in Texas and lobbying politicians. They argue that pipeline spills can cause environmental damage and that oil sands crude contributes more than other oil to greenhouse gas emissions because of the energy required to process it.