Monday, January 24, 2011

WRAPUP 1-Canadian oil pipelines to ration space next month

Space on Canadian oil pipelines will remain tight through at least the end of February, as Enbridge Inc (ENB.TO) and Kinder Morgan Energy Partners (KMP.N) both said on Monday their lines can't ship as much crude next month as customers have requested.

Enbridge, whose lines carry the bulk of oil shipments to the United States from Canada, the biggest U.S. supplier, said five of its lines in the Lakehead system would be apportioned, or rationed, in February. The system distributes oil to refiners in the U.S. Midwest and on to the storage hub at Cushing, Oklahoma.

Capacity on Canadian oil pipelines has been tight since this summer, when two of Enbridge's lines in the Midwest ruptured, backing up crude supplies in Alberta. Oil producers have since been trying to winnow down Alberta stockpiles, routinely requesting more space than available on the lines leaving the province.

Much of that excess Alberta oil has been making its way to the Cushing hub, where tanks are already brimming with crude. Analysts have tagged the rising volumes of Canadian crude to Cushing as a factor behind a widening spread between U.S. benchmark oil prices and Brent, the world marker.

Enbridge said the February apportionment is result of temporary capacity restrictions one some of its lines as it steps up inspections following the two ruptures, as well as high nominations from shippers.

It said lines 6A, 14 and 62, which carry Canadian oil from Superior, Wisconsin, to Illinois, Indiana and on to Cushing are apportioned at 7 percent, so that shippers will get only 93 percent of the space they have requested.

Line 6B, which was closed for nine weeks last year after a rupture spilled more than 20,000 barrels into a Michigan river system, is apportioned at 16 percent.

Enbridge's 490,000 barrel per day Line 5, which runs from Superior to Sarnia in southern Ontario, is apportioned by 23 percent as the company steps ups maintenance and inspection work.

TRANS MOUNTAIN RATIONING

Kinder Morgan is again rationing capacity on its Trans Mountain pipeline system, which takes Alberta crude to southern British Columbia and Washington's Puget Sound, as shippers wanted to put more oil on the line than it could carry.

Kinder Morgan said on Monday that it cut back shipper nominations for space on the system next month by 33 percent, meaning the system's customers will get to ship only 67 percent of the volumes requested.

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