Enbridge partners with Enterprise Products to build new U.S. crude pipeline

CALGARY – While a big Canadian energy company faces mounting criticism over a planned U.S. oil pipeline, its Calgary rival is proposing its own pipeline project linking oil markets in the southwestern United States.

Enbridge Inc. and Enterprise Products Partners LP (NYSE:EPD) announced Thursday they have agreed to build a new crude pipeline to relieve an oversupplied depot in Oklahoma and move oil to Texas Gulf Coast refineries.

The deal comes as environmentalists and labour groups on both sides of the Canada-U.S. border continue to assail TransCanada Corp.’s planned Keystone XL pipeline, saying it could harm the environment and destroy jobs in the U.S.

The TransCanada (TSX:TRP) line would run 2,700 kilometres to deliver oilsands oil from Alberta to refineries on the Gulf of Mexico. It would cross Montana, South Dakota, Nebraska and Kansas before hooking up with TransCanada’s existing pipelines to move oil to Oklahoma and Texas.

Enbridge (TSX:ENB) did not provide a cost estimate for the new Wrangler pipeline, which will run 800 kilometres from Cushing, Okla., to Enterprise’s ECHO storage terminal in Harris County, Tex.

However, the Keystone line – more than three times that size at 2,700 kilometres – has a price tag of about US$7 billion.

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The two major pipeline projects, Keystone XL and Wrangler, reflect a new trend in the North American energy market, as more and more crude flows from Canada and northern U.S. states south through Cushing and to the U.S. oil refinery centres along the Gulf Coast.

Some of that oil will displace crude imported to the Gulf Coast from Venezuela, Mexico, Africa and the Middle East.

Enbridge and Houston-based Enterprise Partners said the Wrangler line will carry 800,000 barrels per day of medium-to-light crude oil that is cheaper than oil imports currently being used by Gulf Coast refiners.

It will also allow Gulf Coast refineries more access to crude oil flowing out of Alberta’s conventional oil wells and oilsands projects.

“We… believe that our complementary skills and shared strategic vision will help ensure success and offer the most efficient and expedient solution for meeting the industry’s need for additional crude oil pipeline infrastructure,” said Michael Creel, president and CEO of Enterprise’s general partner.

“This pipeline will be able to transport all grades of crude oil in batched configuration to meet the diverse needs of shippers, allowing producers to maximize the value of their crude oil and provide a more reliable source of domestic supply for Gulf Coast refiners.”

Enbridge CEO Pat Daniel said the Wrangler project builds on the two companies’ existing storage operations in the southwestern United States.

“We’re pleased that Enterprise shares our vision to design this pipeline to meet the needs over the long-term as the Cushing Hub continues to attract both light and heavy production from North American producers,” Daniel said.

“Combining Enbridge’s large storage position at Cushing, with Enterprise’s ECHO terminal in Houston will provide tremendous connectivity for the industry.”

Enterprise Products Partners LP provides midstream energy services to producers and consumers of natural gas, NGLs, oil, refined products and petrochemicals.

The company operates about 80,000 kilometres of onshore and offshore pipelines; 192 million barrels of storage capacity for gas liquids, refined products and crude oil; and 27 billion cubic feet of natural gas storage capacity.

Enbridge operates, in Canada and the U.S., the world’s longest crude oil and liquids pipeline and also is growing its natural gas transmission and gas processing businesses.

The company employs 6,400 people and also owns and operates Canada’s largest natural gas distributor, with operations in Ontario, Quebec, New Brunswick and New York state.

In Thursday trading on the TSX, Enbridge shares fell 15 cents to $31.55. On the New York Stock Exchange, Enterprise shares rose seven cents to $40.57.