UPDATE 2-Seaway crude line to run well below capacity-filing

Tue Feb 19, 2013 7:04pm GMT

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* 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.
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