Page 4 - NorthAmOil Week 39

NorthAmOil COMMENTARY NorthAmOil
One step forward, two steps back for Enbridge
Pipeline operator Enbridge has encountered setbacks on several different fronts in recent days, but continues to push ahead with its plans, writes Anna Kachkova
NORTH AMERICA
WHAT:
Enbridge’s progress
with various plans has encountered a number of obstacles.
WHY:
The company has had its Mainline open season suspended in Canada, and a permit for the Line 3 replacement denied in Minnesota.
WHAT NEXT:
Enbridge continues to pursue plans such as a proposed tunnel for an underwater section of Line 5.
CALGARY-BASED pipeline operator Enbridge has had an eventful – if not successful – few days. In Canada, an open season to solicit shipper interest in capacity on the company’s Mainline was suspended by the Canada Energy Regu- lator (CER) on September 27. The regulator was responding to producer complaints about Enbridge’s plan to change the way it allocates capacity on the pipeline.
On the same day, regulators in Minnesota denied Enbridge a key water permit for its Line 3 oil pipeline replacement programme. The com- pany will now have to satisfy several additional requirements before it can re-apply for the per- mit. The denial comes as a blow to Canadian producers that have long been waiting for new takeaway capacity out of Alberta amid ongoing regulatory and legal delays to major pipeline projects.
Mainline dispute
Enbridge’s Mainline is the largest crude trans- portation system in Canada, with a capacity of 2.85mn barrels per day (bpd), moving oil from Alberta to Eastern Canada and the US Midwest. Crude shipped on the system accounts for about 70% of Canada’s oil exports to the US. Capac- ity on the pipeline is currently allocated on a monthly basis, but the pipeline operator has sought to overhaul this. Instead, it is propos- ing allocating capacity via long-term contracts of up to 20 years. Enbridge has argued that this would give shippers more certainty, but a num- ber of producers are opposing the plan, claiming such a change would be unfair and would limit their access to the system. Those opposing the planned changes include Suncor Energy and Canadian Natural Resources Ltd (CNRL), which are among Canada’s leading oil producers. Other major producers including Cenovus Energy and Imperial Oil have spoken out in favour of the proposed changes, however.
The CER has ruled that it needs to approve the new terms for contracting capacity on the Main- line before Enbridge can proceed with the open season. The move is an unusual one, as normally
a pipeline tolling application is reviewed by the regulator after bidding for capacity has finished. The CER cited Enbridge’s control of much of the pipeline capacity out of Western Canada, the lack of alternatives for oil shippers and the “considerable opposition” to the open season as
reasons for its decision.
“The commission has concerns regarding the
fairness of Enbridge’s open season process and the perception of abuse of Enbridge’s market power,” the CER said. “Shippers have few alter- native transportation options at this time.”
Enbridge, for its part, has said the move rep- resents a delay, but that it is still intending to go ahead with the planned capacity allocation overhaul.
“Enbridge remains committed to moving ahead with contract carriage on the Mainline and has strong support for our offering. We will evaluate this decision and the next steps that we will take towards implementing contract car- riage,” an Enbridge spokesman, Jesse Semko, said in a statement.
The company will now have to apply to the CER to request approvals for the tolls, terms and conditions of the proposed service change before another open season can proceed.
Analysts at Tudor Pickering Holt & Co. said in a report that this could mean Enbridge may have to settle for lower tolls than it previously expected.
The company’s current capacity allocation model expires in June 2021.
Line 3 blow
The denial of the permit in Minnesota is a set- back for Enbridge that comes as pipeline oper- ators race to start up significant new takeaway capacity out of Alberta’s oil sands but encounter significant hurdles.
The Line 3 replacement is the largest project in Enbridge’s history, and seeks to fully replace 1,031 miles (1,660km) of the existing Line 3 with new pipeline and associated facilities in both Canada and the US. The project is aimed at improving both safety and throughput on the
The CER has
ruled that it needs to approve the new terms for contracting capacity on the Mainline before Enbridge can proceed with the open season.
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w w w . N E W S B A S E . c o m Week 39
01•October•2019