Petroleum News: California beckons for Enbridge:
"That deal came on the heels of BP acquiring
sole ownership of the Olympic system by taking
over the 40 percent holding of Royal Dutch
Shell.": Saturday 24 December 2005
Non-binding open season for
planned Gateway pipeline generates unexpected
response from U.S. West Coast; larger line
News Canadian Contributing Writer
The hunt by U.S. West Coast refiners for
crude oil to replace dwindling shipments from
Alaska has resulted in a course correction for
Enbridge’s planned Gateway pipeline.
The response to a non-binding open season
that ended Dec. 16 could see the West Coast take
more than 25 percent of Gateway’s volumes —
originally targeted at 400,000 barrels per day —
and has prompted Enbridge to look at sharply
increasing Gateway’s capacity.
That announcement came just a week after
Enbridge signaled its growing interest in the
Pacific Northwest and California by forking over
US$101.9 million for a 65 percent stake in a
290,000 bpd refined products pipeline.
Richard Bird, Enbridge’s liquids pipeline
vice president, said the stake in Olympic Pipe
Line, controlled by BP’s wholly owned Arco
MidCon, gives the Calgary-based company entry to
a growing market in the U.S. refined products
pipeline sector and an “important window” to the
It also throws a gauntlet in the direction
of Kinder Morgan Canada (formerly Terasen),
which is seen as strongly positioned from its
Vancouver base and through its Trans Mountain
pipeline to expand in the
The Olympic network includes 385 miles of
6-inch to 20-inch diameter pipe, with the
pipeline extending from Blaine, Wash., to
Portland, Ore., linking four Puget Sound
refineries to terminals in the two states as
well as a 500,000 barrel products terminal.
That deal came on the heels of BP
acquiring sole ownership of the Olympic system
by taking over the 40 percent holding of Royal
Although contractual commitments have yet
to be negotiated, the bidding by prospective
Gateway customers exceeded the 400,000 bpd
economic threshold set by Enbridge.
Company spokesman Jim Rennie told
Petroleum News that Enbridge is now weighing the
possibility of increasing the pipeline’s
diameter to 36 inches from 30 inches.
The project involves a 720-mile link from
Edmonton to a deepwater tanker terminal at
Kitimat, on the British Columbia coast, with a
possible in-service date of 2010.
With the addition of pumping stations that
could give Gateway eventual capacity of 800,000
to 1 million bpd, he said, while emphasizing
that the open season interest did not reach
But Rennie said it could make “more sense”
to build a 36-inch line which would allow a
significant reduction in tolls as volumes build.
An earlier non-binding open season for a
twin pipeline to import condensate, used to
dilute bitumen and allow it to move more easily
through pipelines, attracted similarly strong
That test of the market showed a desire to
deliver 265,000 bpd, substantially higher than
Enbridge’s projected 150,000 bpd.
To meet its tentative target of filing
with Canada’s National Energy Board in the
second quarter of 2006, Enbridge, in addition to
negotiating shipping contracts, must complete
environmental and engineering work and
consultations with First Nations, communities
and governments along the Gateway route.
Rennie said those discussions have focused
on issues of compensation for land owners, jobs
and environmental impact.
Bird said in a statement following the
open season that by building the condensate and
oil sands pipelines in tandem “the increased
scale for both pipelines would provide a very
Enbridge has estimated that building both
lines at the same time instead of as standalone
projects could save C$600 million in
But a final cost estimate will not be
available until a regulatory application has
Given its talk of a much larger project,
Enbridge is seen as having edged ahead of Kinder
Morgan, which is exploring the prospects of a
625,000 bpd pipeline from Alberta to Prince
Rupert or Kitimat, targeting the same California
and Asian markets as Gateway.