Canadian heavy crude will continue to displace Mexican and Venezuelan imports to the US Gulf Coast and meet more than half of the region’s demand for heavy sour barrels by 2030, expanding from 30% in 2018, Enbridge CEO Al Monaco said Friday.
Demand for Canadian crude also will rise as Gulf Coast refiners increasingly blend heavy barrels with light sweet barrels from the Permian Basin to create medium sour blends, Monaco said during the pipeline company’s fourth-quarter earnings call.
“The US Gulf Coast is a very strategic part of North America for us,” Monaco said. “We think the Gulf will be the epicenter of how North America will prosecute its global energy advantage, which is hinged on ultra-low-cost supply feeding growing global energy demand.”
Canadian oil producers want to take advantage of reduced Gulf Coast imports of Mexican and Venezuelan crudes, but pipeline and rail capacity out of Alberta remains constrained.
The US Gulf Coast imported 1.35 million b/d of heavy crude in November, according to the most recent data from the US Energy Information Administration. Mexico supplied 575,800 b/d, or about 43%, and Canada supplied 368,700 b/d, or 27%. US sanctions blocked all Venezuelan imports.
A year earlier, the three countries’ heavy supplies to the US Gulf Coast were more closely matched: 559,800 b/d from Canada, or 29%; 542,000 b/d from Mexico, or 28%; and 492,800 b/d from Venezuela, or 25%, according to EIA’s data for November 2018.
Pipeline updates
Enbridge’s 370,000 b/d Line 3 replacement to the US Midwest is among three delayed pipeline projects that will boost Canada’s takeaway capacity and is expected to be the first online.
Monaco did not give a new start-up target for the project, but said the company was optimistic it would clear the remaining legal and regulatory hurdles. Construction would take six to nine months after obtaining final permits, he said.
Platts Analytics expects at least two of the delayed Canadian pipeline projects to be completed by the end of 2022.
The other two projects are the Canadian federal government’s 590,000 b/d TransMountain pipeline expansion to British Columbia and TC Energy’s 830,000 b/d Keystone XL from Alberta to Nebraska.
On Enbridge’s 540,000 b/d Line 5, Monaco said the company has filed permits with Wisconsin agencies and the US Army Corps of Engineers to replace a 40-mile section of the pipeline to re-route it around the Bad River Band of the Lake Superior Tribe of Chippewa Indians’ reservation.
The tribe is contesting expired easements, which Enbridge must renew to continue operating the pipeline. The system crosses 12 miles of the reservation.
“We’ve been doing this to meet their desire of getting off the reservation as quickly as possible, and I think we’re well on track for that,” Monaco said. “But we are still open to have further discussions with them if they do change their mind.”
Line 5 is a key route for light crude and NGLs to the US Midwest and Ontario, including about 55% of Michigan’s propane demand. The 67-year-old pipeline also faces legal issues in Michigan, the governor and attorney general have promised to shut it down and block a replacement tunnel under the Straits of Mackinac.
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