Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD:US) plan to start crude oil shipments on the Seaway pipeline from Cushing, Oklahoma, to the U.S. Gulf Coast on about May 17, according to a filing with regulators.
The initial transit time will be about 15 days on the 150,000-barrel-a-day line, said Rick Rainey, a Houston-based spokesman for Enterprise. The line will require about 2.5 million barrels of oil to fill.
The shipping duration will be reduced to about five days after the line’s capacity is boosted to about 400,000 barrels early next year, he said.
Uncommitted rates will be $3.82 a barrel for light crude and $4.32 for heavy crude, according to a proposal subject to approval from the Federal Energy Regulatory Commission.
“We are confident that the rates are just and reasonable,” said Rainey. “This is designed to give the market a little more guidance on what we are talking about in terms of rates for committed shippers versus non-committed shippers.”
A request for market-based rates for uncommitted shippers on the pipeline is still pending, he said.
Five-year committed agreements to ship light oil in volumes less than 100,000 barrels a day will cost between $2.75 and $3 a barrel. Ten-year agreements for the same grade of oil and the same volume will cost between $2.50 and $2.75.
The discount for West Texas Intermediate for June delivery compared with Brent narrowed $2.63 to $15.26 a barrel at 1:40 p.m. in New York, according to data compiled by Bloomberg.
Committed Shipper Costs
The rate to ship more than 100,000 barrels a day of light oil will cost $2 to $2.25 a barrel and a 10-year commitment is required, the filing showed. Five-year commitments to ship heavy oil on the pipeline will cost $3.25 to $3.50 to transport less than 100,000 barrels a day.
“The committed shippers rates are slightly below the market expectations of $3 per barrel,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone.
Ten-year commitments to ship the same volume of heavy oil on the line are $3 to $3.25 a barrel. The price to ship more than 100,000 barrels a day of heavy oil is $2.35 to $2.75 a barrel with a 10-year agreement.
Enbridge and Enterprise received enough shipper commitments to increase the capacity of the Seaway pipeline by mid-2014, according to a statement issued March 27. The companies will add 450,000 barrels a day to the pipeline, boosting the system’s capacity to 850,000.
“As the Seaway system becomes operational and expands, the market should see the Brent-WTI spread narrow substantially,” Lipow said.
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