FACTBOX-Canada’s clogged oil pipeline system

Dec 9 (BestGrowthStock) – Tightening space constraints on Enbridge
Inc’s (ENB.TO: ) pipeline network, which ships the bulk of
Canadian oil exports to the United States, have led to a glut
of crude in western Canada.

The situation worsened on Thursday when Enbridge said it
had shut a major U.S. Midwest pipeline for extended
maintenance. [ID:nN09269761]

In response, some oil producers have suspended shipments
and halted production. Prices for Canadian crude have skidded.

Here are some key facts.

CAUSE: Enbridge, which moves about 2 million barrels a day
to the U.S. Midwest and Midcontinent as well as southern
Ontario, has been running two pipelines at reduced pressure
since restarting them after ruptures and spills in the summer.

They are Line 6A, which moves up to 670,000 bpd to
Griffith, Indiana, from Superior, Wisconsin; and 6B, a
290,000-bpd line to Sarnia, Ontario from Griffith.

The reductions have led Enbridge to apportion, or ration,
space on several of its U.S. lines after monthly shipper
nominations exceeded their capacity.

In early December, an Illinois utility’s substation tripped
off line, cutting power to a pumping station on Line 6A and
reducing the flow for about a week. That forced Enbridge last
week to cut its shippers’ allocations even more.

Enbridge has said it expects the situation to improve as
the month progresses.

However, the company said on Thursday it had shut 6A again
for a scheduled integrity test and the pipeline was not
expected to be back in service until late Friday.

Adding to the squeeze, Kinder Morgan (KMP.N: ) has rationed
space on its 300,000-bpd pipeline to Canada’s West Coast from
Alberta.

EFFECT: With the bottleneck, Enbridge storage tanks in
Edmonton and Hardisty in Alberta, and Superior in Wisconsin are
full and the company has had to disrupt some feeder pipeline
service. Some producers have been unable to ship oil and have
cut output.

Physical prices for oil, especially heavy oil, have
slumped. The discount on Western Canada Select heavy blend oil
compared with U.S. benchmark light crude has ballooned by about
27 percent since the start of December, and was recently quoted
at more than $20 a barrel.

IMPACT ON PRODUCERS:

– Devon Energy Corp (DVN.N: ) said on Thursday it had reduced
heavy oil production by 10,000 bpd. The company’s Canadian
operations produced 65,000 bpd in the third quarter.
[ID:nN09255894]

– Syncrude Canada Ltd, which runs one of the country’s
largest oil sand plants, said on Wednesday it had not cut
production, but had been forced to delay shipments. A
spokeswoman at the 350,000-bpd joint venture did not specify
volumes affected.

– Cenovus Energy Inc (CVE.TO: ) said on Tuesday its oil sand
operations were not affected but the company had slowed
production at conventional fields, such as Pelican Lake in
Alberta and Weyburn in Saskatchewan. It is storing and trucking
oil where it can.

– Suncor Energy Inc (SU.TO: ), the country’s biggest oil
company, said on Wednesday tight pipeline space was “putting
some pressure” on its ability to ship crude. It said the impact
was minor and it was working to ensure that remained the case.
(Reporting by Jeffrey Jones; Editing by Dale Hudson)

FACTBOX-Canada’s clogged oil pipeline system