Eastern Canadian Refinery Access Initiative
Although Canada is one of the largest suppliers of crude oil in the world, it may come as a surprise to most Canadians that refineries in Ontario and Quebec currently rely on a significant proportion of imported crude feedstock.With the recent price of western Canadian light crude oil discounted as much as $25 per barrel from foreign-sourced offshore supply, eastern Canadian refineries are at a significant competitive disadvantage even after adjusting for transportation cost to the refinery gate.
Enbridge's Canadian Refinery Access Initiative is a potential solution to level the playing field for Canadian refineries, protecting their long-term viability and safeguarding jobs.
Bringing Canadian Oil to Canadian Refineries
Line 9 was originally built in the 1970s to supply eastern Canadian markets with western Canadian crude oil. This line was reversed in the 1990s as oil imports became more affordable. As a result, although Canada is one of the largest suppliers of crude oil in the world, refineries in Ontario and Quebec rely on a significant proportion of imported crude oil from areas such as the North Sea, West Africa and the Middle East. This and the fact that western Canadian crude oil is currently priced lower than foreign-sourced crude oil supports a renewed look at energy supply within Canada. Enbridge, and Ontario and Quebec-based refiners, have identified these current conditions as supporting the re-reversal of Line 9. In July 2012, the NEB approved Enbridge’s standalone application for the reversal of the segment of Line 9 between Sarnia and North Westover, (Line 9A) based on customer demand for delivery of western Canadian crude oil to Enbridge’s Westover Terminal in Ontario (and the Nanticoke refinery). We plan to begin construction activities early in 2013 and put the reversed segment in service in Fall of 2013.
Enbridge announced in September of 2012 its plans to move forward with a reversal of the remainder of the Line 9 from North Westover, Ontario to Montreal, Quebec (Line 9B) and to increase the capacity of the entire Line 9. Enbridge submitted an application to the NEB on November 29, 2012 for the Line 9B Reversal and Line 9 Capacity Expansion Project. The application includes environmental studies, an engineering assessment, economic analysis and stakeholder consultation.
Our view is that projects such as the proposed reversal of Enbridge’s Lines 9A and 9B are critical to the security of energy supply in Canada and that increasing the supply of lower-priced Canadian oil to Canadian refineries benefits the refining industry and the national economy.
Benefits of the Initiative
- Enhances security of supply in Canada through a more reliable and increased supply of western Canadian crude and Bakken light crude oil to Ontario and Quebec refineries.
- Increases supply of lower priced Canadian oil to Canadian refineries benefiting the refining industry and the Canadian economy. Western Canadian crude has recently been priced at as much as $25 less per barrel than offshore, foreign oil. If pricing differentials were to remain at these levels (following adjustment for transportation costs to a Quebec refiner’s gate) a potential savings of up to $4.0MM per day, or $1.5B per year, could be realized if the pipeline runs at capacity.
- Benefits the economies of Ontario and Quebec through increased provincial revenues and jobs.