Enbridge Inc., Calgary, (NYSE: ENB) and BP Pipelines (North America) Inc., Warrenville, Ill., have unveiled plans to develop a new delivery system to transport Canadian heavy oil from Flanagan, Illinois, to Houston and Texas City, Texas, using a combination of existing facilities and new pipeline construction where required. The joint investments of the phased capacity additions could cost from $1- to $2 billion.

The two companies report the new delivery system is expected to be in service by late 2012 with an initial total system capacity of 250,000 barrels per day into the Gulf Coast. Enbridge and BP intend to use the BP No. 1 System and other existing pipelines north of the Cushing, Oklahoma, oil hub with some new pipeline construction south of Cushing, to connect to markets in Houston and possibly Nederland, Texas.

Initial receipts at Flanagan, where the system would interconnect with Enbridge Energy Partners’ Southern Access pipeline, would be approximately 140,000 barrels per day with deliveries to Gulf Coast markets. The remaining 110,000 barrels per day would originate from interconnecting pipelines at Cushing.

“This proposed project offers timely and economic access for shippers to the U.S. Gulf Coast market,” says Steve Wuori, executive vice president of Liquids Pipelines, Enbridge, Inc. “The new system would be a continuation of our phased approach to Gulf Coast market access, which has the objectives of minimizing capital cost and financial commitments required of shippers, maximizing use of existing pipelines and rights-of-way and ensuring attractive producer netbacks."

Wuori says the project would be timed to coincide with the projected ramp-up of oil production in western Canada. It would be complementary to Enbridge’s other market initiatives including the Trailbreaker Project, which is planned to offer Gulf Coast access by tanker from Portland, Maine, by mid-2010; the Southern Access Extension, which is expected to handle both heavy and synthetic crude access to Patoka, Illinois, by 2011; and the Texas Access Pipeline, which is positioned to move greater oil volumes from Patoka to the Gulf at the time required by the market.

“These options offer unparalleled flexibility to shippers, and this project reflects our objective to provide our customers with the best transportation solutions available,” Wuori says.

BP Pipelines (North America) president Jim Lamanna says, “This proposal is consistent with BP's goals of maximizing value from existing assets and minimizing environmental impacts. Combined with the construction and operating experience of these two companies, the proposed new delivery system will offer shippers the economics, predictability and flexibility that are required in this high-cost environment. Also, timely redeployment of existing facilities significantly reduces the environmental impact associated with alternative proposed cross-country pipelines.”

The two companies plan to operate the pipeline system by way of a joint venture, subject to completing final agreements and securing other required approvals.  JAS