Completion of the pipeline system able to move large volumes of western Canadian crude oil from Alberta to the U.S. Gulf Coast—the one not named Keystone—was celebrated Jan. 16 at the Jones Creek terminal near Freeport with numerous salutes to international cooperation and competition in free markets.

“Make no mistake about it: Canadian crude is in the game now here on the Gulf Coast and we will compete for space against waterborne imports,” said Al Monaco, president and CEO of Calgary-based Enbridge Inc. “For refiners, it provides a desirable and secure source of feedstock for the expansion of heavy capacity that they have had to make. Bigger picture: Canadian crude in the Gulf means energy security for North America. And when supply and demand are connected with the lowest-cost transportation by pipelines, that can only mean one thing—it’s good for consumers.”

The system is a joint venture of Enbridge and Houston-based Enterprise Products Partners LP. It incorporates Enbridge’s new 593-mile, $2.8 billion Flanagan South Pipeline, with capacity of 600,000 barrels per day (bbl/d) from Illinois to the Cushing, Okla., hub, and Enterprise’s newly looped Seaway Pipeline, which moves up to 450,000 bbl/d crude from Cushing to the Jones Creek terminal on the Gulf Coast. The project more than doubles capacity of the Seaway system to about 850,000 bbl/d. The 65-mile lateral from Jones Creek to the ECHO terminal in Houston was completed in January, and the 100-mile lateral between ECHO and Beaumont/Port Arthur was completed last December.

Low oil prices will likely keep the new line at half-capacity for the near term, but did not appear to concern the partners, who emphasized the long-term nature of investments like these.

“These are very tough times for oil producers and margins are really thin,” Monaco acknowledged. “That’s exactly the time to make sure that you’re accessing the best markets and maximizing that price. Getting into the right markets is even more critical in this price environment.”

Jim Teague, executive vice president and COO of Enterprise, agreed.

“We’ve drained Cushing, and until it replenishes—and it looks like it’s in the process of doing that—Flanagan South is going to help the Pony Express [Pipeline],” he said. “We are close to fully subscribed, if not fully subscribed, and 10 years is a long time. I think before it’s all said and done that Canada’s going to produce a heck of a lot more crude, as are some of the basins here in the U.S. This whole North American continent is not going to be denied as far as natural resources are concerned.”


Marking the completion of the joint venture by Enbridge Inc. and Enterprise Products Partners LP to build the Flanagan South and Seaway Loop pipelines are, from left to right: Al Monaco, Enbridge president and CEO; Jim Teague, Enterprise executive vice president and COO; Greg Rickford, Canada’s minister of natural resources; and Jim Prentice, premier of Alberta. Source: Hart Energy

Even in this low price environment, the project was welcomed as a major step forward by Canadian government officials.

“This is not about a single pipeline, this is about completion of an important system which really moves Albertan crude from northern Alberta to the Gulf Coast, and in so doing, it allows us as Canadians to achieve access to the best markets,” said Jim Prentice, premier of Alberta. “It allows us to achieve a marriage between Alberta crude oil production and access to the largest refinery complex anywhere in the world, and secondly, it allows us to achieve superior prices. We are already beginning to see the consequences of that in terms of Alberta’s finances just from the imminence of the opening of this project.”

Later, Prentice told Canadian journalists that the province faced a CA$7 billion (US$5.79 billion) shortfall in its 2015 budget as a result of oil prices dropping below $50/bbl. Alberta provides 25% of all oil imports to the U.S., ahead of Saudi Arabia’s 17%, Prentice said.

Flanagan South is fed by an existing pipeline and neither of the new pipes crosses the U.S.-Canadian border, avoiding the need for federal approval, unlike Keystone XL. Nevertheless, the TransCanada Corp. project in limbo was not far from the minds of those in attendance. Prentice was on his way to Washington to argue in favor of Keystone’s permitting and Greg Rickford, Canada’s minister of natural resources, alluded to the situation during his remarks.

“Canada and the United States are already each other’s biggest energy customers to the tune of more than $140 billion last year alone,” he said. “Every day, our two countries count on 70 pipelines—we’d like to see that go to 71.”