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Enbridge, which wants to change the contract terms on the largest Canadian oil pipeline network, believes that Canadian producers who have opposed that change may want to stall a review of the proposal in the hope that the fate of the other pipelines in the works could become clearer soon, a senior Enbridge executive told Bloomberg.
Enbridge operates Mainline, the largest pipeline network that sends Canadian crude oil to the United States with capacity of 2.85 million barrels per day (bpd).
In December, Enbridge filed an application to the Canada Energy Regulator (CER), proposing a new framework on the way crude volumes are being contracted and shipped via the Mainline pipeline. Currently, Enbridge allocates capacity on the Mainline on an uncommitted basis, using a monthly nomination system. But the pipeline company wants to change that allocation system by contracting 90 percent of the capacity under long-term contracts, leaving only 10 percent for uncommitted or spot shipments.
Enbridge argues that the new system will ensure non-discriminatory and open-access to capacity, improve takeaway capacity out of Western Canada, and support Western Canadian oil prices.
“Shippers representing approximately 70 per cent of the Mainline's current throughput support our approach,” Guy Jarvis, Enbridge Executive Vice President, Liquids Pipelines, said in December when Enbridge filed its application.
But several oil producers, including the largest, Canadian Natural Resources, oppose the move and asked this week the CER to split the review process into two parts, the first being the fundamental question if Enbridge should be allowed to convert access to the pipeline to long-term contracting.
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Asked to comment on the opposition from some producers, Enbridge’s Yu told Bloomberg:
“It might be strategic from some of these shippers because it would help them gain more clarity on what’s happening on some of the other pipelines that are under development.”
Canadian oil producers have been struggling with insufficient pipeline takeaway capacity in recent years. As a consequence, producers have been suffering from depressed Western Canadian oil prices while Line 3, the Trans Mountain Expansion, and Keystone XL are months and even years away from start of operations. That is, if they clear all legal and regulatory hurdles, which opponents of the pipelines have filed in courts over the past few years.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.