Explosion on Strategic Canadian Pipelines that Supply 1.5 Million Barrels of Oil Per Day to U.S.
November 29th, 2007Awaiting damage assessment… Readers in the Midwestern U.S. should keep an eye on this. I’m assuming that the government can dip into the Strategic Petroleum Reserve, but… With winter kicking in, take no chances.
UPDATE 1: DO NOT ASSUME SPR AVAILABILITY FOR THIS:
Landlocked inland refiners such as Flint Hills Resources’ 280,000 barrels per day (bpd) refinery in Rosmount, Minnesota, that rely on the pipeline for the baseload supplies, would have to drag additional shipments inland from the Gulf or East Coast that could reverberate.
“The only way to supply refiners that do not have Canadian crude is to send crudes from the Gulf Coast up the pipelines. These are mostly light sweet crude,” a Singapore-based trader said.
That will create a knock-on impact for demand for similar high-sulphur, dense crudes that can be shipped to the United States such as Russia’s main Urals blend or Middle East grades such as Oman, which rarely travels to U.S. shores.
Much will now depend on the duration of the outage, and whether the U.S. government reaches into its 700 million-barrel Strategic Petroleum Reserve (SPR) to try to fill the gap — although logistics may make that tricky.
*** “The problem is that the SPR oil is all in PADD III Gulf Coast, while the crude imports that have been lost are all in PADD II Midwest, and there is limited transport capacity between the two,” Sempra analyst John Kemp said. ***
…
The explosion on Wednesday about 3.0 miles (4.8 km) southeast of its Clearbrook, Minnesota, terminal shut down a line that carries nearly one-fifth of U.S. crude oil imports.
— END UPDATE —
UPDATE 2: Two of Four Pipelines Restarted:
LONDON, Nov 29 (Reuters) – Two of the four pipelines supplying Canadian crude to U.S. Midwest refineries has restarted after an explosion halted nearly a fifth of U.S. imports, operator Enbridge said on Thursday.
The pipelines, with a total capacity of 646,000 barrels per day, restarted operations a few hours ago, the company’s spokesman said.
Two employees were killed in the blast and fire on one of the four pipelines. Enbridge said in a statement that the cause of the explosion had not yet been determined.
Larry Springer, the company spokesman, said the main fire has been extinguished.
— END UPDATE —
Couldn’t letter’ drop below $90, could they? I kid, of course…
Well, mostly, I kid…
Fascinating, though, the timing of this… Oil dropping the most since January over a two day period:
Nov. 28 (Bloomberg) — Crude oil fell, reaching its biggest two-day drop since January, as a U.S. government report showed that supplies declined less than expected.
…and then * BOOOOOOM!!! *
Via: Bloomberg:
Enbridge Inc., Canada’s largest pipeline company, said a fire at one of its pipelines that supply crude oil to the U.S. is still burning after a blast yesterday that killed two workers.
The company closed the four pipelines of the Lakehead system, capable of delivering 1.5 million barrels a day, and “at least one or two lines will be shut down for quite some time,” spokeswoman Denise Hamsher said today by telephone from Clearbrook, Minnesota, where Enbridge operates a terminal.
Oil surged more than $4 a barrel, the most in a month, after a leak and explosion occurred at the No. 3 pipeline, which was undergoing maintenance. Canada was the largest exporter of oil to the U.S. in August, delivering 1.9 million barrels a day that month, according to the latest statistics from the U.S. Department of Energy.
“This is a very important pipeline (system), which is why we see a knee-jerk reaction in crude oil prices to the news of the shutdown,” Lawrence Eagles, an analyst with the Paris-based International Energy Agency, said today. “There is a tendency for people to assume the worst, but we need to look at the extent of the damage and how long the shutdown will last.”
Crude oil for January delivery gained as much as $4.55, or 5 percent, to $95.17 a barrel in electronic trading on the New York Mercantile Exchange. That’s the biggest increase since Oct. 31. The contract, which rose for the first time this week, traded at $94.17 at 9:29 a.m. in London.
Visual Inspections
Enbridge is waiting for the fire to burn out before inspecting the Lakehead system, spokesman Larry Springer said by telephone from San Antonio today.
“We want to get in and visually inspect lines 1 and 2, but until the fire is down a little bit more we can’t do that,” Springer said. “If they are OK then we would be able to consider restarting those.”
Enbridge’s Hamsher said the company will know by tomorrow if some of the pipelines can be safely restarted. The blast occurred about 3 miles (4.8 kilometers) from the Clearbrook terminal, the Calgary-based company said in a statement distributed yesterday by Market Wire.
“The site is not accessible right now and we are unable to assess the damage,” Hamsher said. “We are working with the emergency services on putting out the fire, and our top priority is the safety of all our workers.”
Lakehead System
The Lakehead network carries oil from the Canadian border to Chicago and Detroit with an extension to Buffalo, New York, according to the Enbridge Web site.
The system delivered an average of 1.5 million barrels a day in 2006, according to the Web site of Enbridge Energy Partners LP, the subsidiary that operates Lakehead. That represented 71 percent of refinery demand in Minnesota, 62 percent in the greater Chicago area, and 82 percent in Ontario.
It looks like Ontario will be the most effected by this. It figures. Higher gas prices just in time for Christmas. 🙁
Wow, that would be really seriously fucked up if this turned out to be some sort of act of self-inflicted terrorism. (Not in the least in my own personal opinion because I live in the Midwest!)
I live in Minneapolis. I heard about the explosions right away and went right across the street to top off my gas tank on the way to work.
Imagine my chagrin at a sure thing failing, as gas prices actually slouched about $.08 over the next couple days.
Also possibly related, this weird ex-mil guy Eric May in Texas is convinced that exercises are cover for the secret contractor teams to bomb pipelines around Galveston area. Apparently May and his ‘Ghost Troop’ have issued 6 warnings of imminent doom, followed an impressive 5 times by explosions.
Such developments are certainly less surprising in Texas than Minnesota though.