By TOM FOWLER, San Antonio Express News, September 29, 2011
Houston and Canadian firms propose Wrangler line from Cushing, Okla., to the Gulf Coast.
HOUSTON — TransCanada's Keystone XL pipeline isn't the only big oil pipeline in the works.
Houston-based Enterprise Products Partners and Canadian firm Enbridge Inc. said Thursday they plan to build a pipeline to move oil from the oversupplied hub at Cushing, Okla., to Gulf Coast refineries, giving the controversial Keystone XL pipeline a bit of competition.
The proposed Wrangler Pipeline would be a 36-inch-diameter pipe starting at Enbridge's existing Cushing terminal and running about 500 miles to the coast, largely following existing pipeline corridors.
It would end at Enterprise's ECHO crude-oil storage terminal in southeast Harris County. From there it could feed refineries in Texas City, Pasadena, Deer Park, Baytown and others along the Houston Ship Channel. A proposed 85-mile connection could move crude to refineries in the Beaumont-Port Arthur area.
Initially, the pipeline would have the capacity to transport up to 800,000 barrels per day but be designed to handle even more volume in the future.
It would require regulatory approval, but because it would be entirely within the U.S., it wouldn't need the State Department nod required for the Keystone XL, a 2,100-mile proposed line to move oil from Alberta to Cushing and then to Beaumont-Port Arthur.
The Keystone project has met stiff resistance from environmentalists concerned about the energy-intensive production of crude in Canada's tar sands, and from communities worried about potential oil spills along the project route.
Wrangler, Keystone XL and similar projects announced in the past year are aimed at moving oil to Gulf Coast refineries from what have become North America's surging oil-production regions.
Rising production from Canada's tar sands and U.S. fields such as the Bakken in North Dakota and the Niobrara in Kansas, Wyoming and Colorado has overwhelmed the storage, transportation and refining capacity of the Midwest.
This has led to an oversupply of oil at the key pipeline hub in Cushing, which is where the New York Mercantile Exchange prices oil for its most commonly quoted benchmark. This oversupply at Cushing has led to a wide gap between NYMEX oil prices and global benchmarks, such as North Sea Brent crude.
Rusty Braziel, vice president of marketing for Bentek Energy, said Wrangler could compete with the Cushing-to-Gulf Coast third leg of the Keystone project.
“But based on Bentek's outlook for light crude oil production from the major shale and tight crude plays like Bakken, Eagle Ford, Anadarko, Permian and Niobrara — plus imports of heavy crude from Canada — there should be more than enough supply for both of these projects,” Braziel said. “Both Wrangler and Keystone are great news for the refining industry along the Gulf Coast.”
Jeff Dietert, an analyst with Houston-based bank Simmons & Co., says the country won't need the capacity of both Wrangler and Keystone in 2013 — when Keystone would be slated for start-up. But there no doubt will be a need for both projects in the future, he said.
Enterprise and Enbridge will hold what's called an open season from Monday to Nov. 3 to gauge interest from potential customers. That is shortly before federal officials are expected to make their final decision on the Keystone project, and the uncertainty about how much capacity will be available might make some shippers hesitant to commit to Wrangler, Dietert said.
But it's not unusual for firms to extend open seasons to seek additional interest, Dietert said. The companies even could make the project capacity a bit smaller if they felt like they couldn't attract the full 800,000 barrels per day of customer commitments.
tom.fowler@chron.com
