A Pimple At Risk Of Being Popped -- September 29, 2014

I track pipelines of interest here; one of the first I tracked was Enbridge #9 (#9A). I suppose I first blogged about Enbridge #9A two years ago. RBN Energy has talked about it at least once.

This is a story about the crude oil pipeline from Portland, Maine, to Montreal, Quebec, the Portland-Montreal Pipeline (PMPL), which is, to some degree, related to the Enbridge #9.

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Historically, ocean-going tankers brought crude oil to the Port of Portland (Maine) where it was offloaded and then by pipeline brought to the refineries in Montreal, Canada.

But now, foreign oil is not needed, and is more expensive than North American oil, so the port is seeing less crude oil traffic.

There is a chance that the Canadians could end up exporting their oil through the Portland, Maine, port.

At least that's how I understand the story.

From the linked story:

The rapid decline is tied to shifting market conditions in Canada that have put the operation of the pipeline and its South Portland marine terminal in jeopardy.

The pipeline’s sole remaining refinery customer in Montreal is in the process of weaning itself from imported crude oil in favor of less-costly supplies in North America.

The transition will be aided by work underway to reverse the flow of an oil pipeline that connects western Canada and Montreal through Ontario, called Line 9. These changes are on track to be done next year.

These events call into question the economic viability of the 73-year-old South Portland facility, which at its peak served several refineries in Quebec and Ontario.

The reason lies with the changing business practices of the last Montreal refinery, owned by Suncor Energy, a minor partner in the pipeline. Suncor can process 137,000 barrels per day. It’s making a transition from overseas crude oil to supplies from western Canada and North Dakota, and, to a lesser degree, off the coast of Newfoundland. It began making the switch last year via rail cars, but the big change will come next year when Enbridge Corp. reverses Line 9.

At a hearing last year before the National Energy Board of Canada on the Line 9 re-reversal, Suncor cited a consultant’s report that estimates an average $2-per-barrel price advantage for North American oil projected out to 2025. Suncor is a major producer of tar sands oil, so it’s not surprising that the company wants to use cheaper oil that it’s producing to feed its oil refinery. Suncor has indicated that the switch is critical to the refinery’s economic survival.

Various media reports in Canada have noted that both Suncor and the only other operating Quebec refinery, Valero Energy Corp. near Quebec City, plan to use only North American crude by next year.

The best bet for the future of the Portland-Montreal Pipe Line, said Auers, the Dallas petroleum consultant, is for its owners to reverse the flow to export Canadian crude through South Portland. A reversal has been proposed in the past, but it’s strongly opposed by environmental activists. The company has insisted there are no current plans to reverse the flow, but has said it’s keeping all options open.

The good folks in Portland, Maine, should visit Bedford, Massachusetts.