The recent start of operations of the Enbridge Line 3 replacement pipeline could cut shipments of crude by rail from Canada to the United States, the U.S. Energy Information Administration (EIA) said on Thursday.
Earlier this year, Enbridge completed the Line 3 replacement project and set the in-service date for the oil pipeline for October 1, 2021, marking the completion milestone of the project that has been delayed for years and faced many court battles.
The project replaced the existing 34-inch pipe with new 36-inch pipe for 13 miles in North Dakota, 337 miles in Minnesota, and 14 miles in Wisconsin. The average annual capacity of Line 3 after replacement is 760,000 barrels per day (bpd), which is a capacity increase of 370,000 bpd compared to the capacity of the original Line 3.
With doubled capacity to carry crude from Edmonton, Alberta, in Canada to Superior, Wisconsin, Enbridge's Line 3 now could reduce the need of crude transportation by other means, especially by rail, the EIA noted.
Crude by rail shipments are more expensive compared to pipeline shipments, but Canadian producers have been forced in recent years to use that option because of insufficient capacity on pipelines out of Alberta.
Crude-by-rail could also be used by shippers because of its destination flexibility, the EIA says.
The increased capacity of the pipeline, which boosts the takeaway capacity of Alberta's oil producers, could also raise the prices of Western Canadian Select (WCS) - the benchmark price of oil from Canada's oil sands delivered at Hardisty, Alberta - and reduce its discount of WCS relative to the U.S. benchmark WTI Crude.
Canada is the single largest source of U.S. crude oil imports, accounting for over 60 percent of all U.S. crude imports last year.
In 2020, U.S. crude oil imports from OPEC hit the lowest on record in annual EIA data going back to 1973, but American purchases of Canada's heavy crude have grown and continue to remain high. Between 2005 and 2020, U.S. crude oil imports from Canada more than doubled to an average of 3.6 million bpd. As a result, Canada's share of total U.S. crude oil imports increased and reached a record-high share of 61 percent last year, the EIA said in April.
By Charles Kennedy for Oilprice.com
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