Reversing Direction: Canada Oil Goes South: Pipeline That Carried Gulf Coast Crude North Now Flows to Refiners
Posted on: Friday, 21 April 2006, 15:00 CDT
By Elizabeth Souder, The Dallas Morning News
Apr. 21--Canadian crude oil has begun arriving at the Texas Gulf Coast for the first time.
Exxon Mobil Corp. said Thursday that it has reversed the direction of an 858-mile, 20-inch pipeline between Beaumont and Illinois.
No longer is it transporting Texas oil to the Midwest; it is instead bringing Canadian oil to Texas.
"It is a first in the industry," said Mike Tudor, president of Irving-based Exxon's pipeline company. "It opens a whole new market for the Canadian producers, and for refiners on the Gulf Coast, it provides an additional source of supply for them, too."
Canadian oil production has risen as producers develop oil sands in Western Canada. The Exxon pipeline connects at Patoka, Ill., with other lines that draw crude from Edmonton, Canada.
Mr. Tudor said a portion of the pipeline had been idle since 2002, when volume from the Gulf Coast declined. About that time, Exxon began considering reversing the direction of the line, he said.
Three Canadian producers agreed to put about 50,000 barrels a day of crude into the pipeline for the next five years. Total capacity is 66,000 barrels a day.
That oil will go to Gulf Coast refiners, which have the technical ability to process the heavy Canadian crude.
Heavy crude contains more unwanted chemicals and sediments than light crude, so heavy crude is usually cheaper to buy, and more difficult to process, than other types.
Mr. Tudor said the Canadian oil could be processed by refiners closer to the production areas. But as production grows, those refiners may not have enough capacity to handle the flow.
The Gulf Coast has about 3.5 million barrels a day of refining capacity, he said, which typically processes Gulf Coast oil or oil that arrives on ships from other areas of the world.
"The more diversity you can have in supply, generally, it's better from an economic perspective and a reliability perspective," Mr. Tudor said.
E-mail esouder@dallasnews.com
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Source: The Dallas Morning News
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