Reuters: Regulatory News: UPDATE 2-Seaway crude line to run well below capacity-filing

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UPDATE 2-Seaway crude line to run well below capacity-filing Feb 19th 2013, 19:04 Tue Feb 19, 2013 2:04pm EST * Flow on line to average 295,000 bpd until end May * Capacity will not exceed 335,000 bpd due to crude mix Feb 19 (Reuters) - Oil shipments on the Seaway pipeline between the U.S. Midwest and the Gulf Coast will run significantly below the line's 400,000 barrel per day capacity for the "foreseeable future," a company filing to federal regulators said, as heavier crudes slow down the line. Seaway, a 500-mile line from Cushing, Oklahoma to near Houston, Texas, was expanded earlier this year to carry as much as 400,000 bpd, in a move expected to help clear surplus crude from the Midwest. However, the line will likely ship an average of just 295,000 bpd between February and the end of May, said William Ordemann, a senior vice president at pipeline operator Enterprise Product Partners LP in a filing to Federal regulators. "Seaway anticipates that throughput on the Longhaul 30-inch System will average approximately 295,000 bpd during the period from February 2013 through May 2013," Ordemann said in the filing dated Feb. 15 to the Federal Energy Regulatory Commission (FERC) on behalf of Seaway Crude Pipeline Co LLC. "Seaway hopes at some point to be able to increase the throughput on the Longhaul 30-inch System to approximately 335,000 bpd; however, until Seaway has additional operating experience with the new pumping equipment, it is not possible to say with precision when or if that will occur." The pipeline, owned by Enterprise and Enbridge Energy Partners LP, was reversed last year to help move crude oil from the U.S. Midwest - where production has soared - down to refineries on the Gulf Coast. Seaway flows will continue well below nominal capacity due to the mix of heavy and light crude flowing down the line, Ordemann said. Heavy crude, such as that from the Canadian oil sands region, can be more difficult to transport down pipelines, requiring more horsepower from pumping stations along the way. Analysts have also cited constraints in crude storage capacity along the Seaway route, refinery maintenance and bottlenecks with other pipelines in the region as reasons why Seaway has not ramped up to near full capacity. Seaway's lower-than-expected crude flows could leave more crude sitting in the U.S. Midwest and limit the gains of West Texas Intermediate (WTI) crude futures, delivered in Cushing, relative to Europe's benchmark Brent crude Barclays Capital expects a $15 a barrel premium for Brent versus WTI crude to last through the second half of 2013 amid ongoing infrastructure bottlenecks in the United States, it said last week. As recently as late January the bank had forecast the spread would narrow to $9 a barrel in the third quarter. Seaway was expanded from a stated capacity of 150,000 bpd to 400,000 bpd at the start of this year. It is expected to expand further, to as much as 850,000 bpd, in early 2014 with the addition of a second, "twin" line to run alongside the existing pipe. Seaway is unlikely to ship more than 335,000 bpd in "the foreseeable future", the filing said, due to its mix of light and heavy crude oil. U.S. crude has fallen to a steep discount against seaborne marker Brent as limited takeaway capacity has trapped crude in the Midwest. On Tuesday, U.S. crude's discount to Brent was around $20.50 a barrel. Link this Share this Digg this Email Reprints

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