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Canada's Enbridge plans 760,000 b/d Line 3 replacement start-up Oct. 1

Highlights

More than doubles Line 3 volumes

Completion comes after myriad lawsuits, protests

Enbridge plans to start up its 760,000 b/d Line 3 replacement project Oct. 1, playing a critical role in alleviating the longstanding pipeline bottleneck for heavy Canadian crude into the US.

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The roughly eight-year-old project increases Line 3's current capacity from 370,000 b/d to 760,000 b/d, and comes as Canadian production has largely recovered from the ongoing coronavirus pandemic and after President Joe Biden essentially canceled the competing Keystone XL Pipeline.

Despite multiple lawsuits and hundreds of arrests amid pipeline protests, the nearly $4 billion US portion of Line 3 construction is substantially complete and ready to come online. The roughly 1,100-mile pipeline stretches from the Alberta oil sands to Superior, Wisconsin, including a new 337-mile route through Minnesota.

"After more than eight years of many people working together, extensive community engagement, and thorough environmental, regulatory and legal review, we are pleased that Line 3 is complete and will soon deliver the low cost and reliable energy that people depend on every day," said Enbridge CEO Al Monaco in a Sept. 29 statement. "From day one, this project has been about modernizing our system and improving safety and reliability for the benefit of communities, the environment and our customers."

As Canada's oil production quickly rebounded to pre-pandemic levels with an ongoing growth outlook, the completion of Line 3 is expected to time well with the continual ramp up of production and crude demand. The pipeline is considered especially important for the Canadian oil sector after the recent cancelation of the competing Keystone XL project following Biden's withdrawal of TC Energy's KXL permitting.

While Keystone XL signified the epicenter of the environmental fight against fossil fuels for years, the Line 3 project flew much lower under the radar until recently. Even as Line 3 protests escalated, Biden refused to enter into the fray, although many Democrats in his administration opposed the project.

The pipeline takes a new route through Minnesota, replaces the existing 53-year-old pipe, and more than doubles Line 3's capacity.

Including Line 3, Enbridge's total Mainline crude oil system is expected to average 2.8 million b/d for all of 2021 -- up from more than 2.6 million b/d in the second quarter because of planned maintenance at oil sands developments and refineries. The completion of the Line 3 project will bring total Mainline capacity up to 3.2 million b/d.

The pipeline will help export more Canadian crude oil to the US and reduce the partial reliance on crude by rail. Producers also are looking forward to the expansion of the Canadian government's Trans Mountain Pipeline, which is slated for completion by the end of 2022.

After the Line 3 replacement comes online, Enbridge also will ramp up the volumes on its $500 million project to expand its Wisconsin-to-Illinois Southern Access crude oil pipeline, with capacity growing from 996,000 b/d to 1.2 million b/d.

Canadian production is expected to reach new highs during the fourth quarter of 2021, so the start-up of the pipeline will be timed well to absorb the growing volumes. With the new pipeline capacity, WCS should be priced at pipeline economics, keeping the differential tight moving into 2022 and reducing the reliance on crude-by-rail exports, according to S&P Global Platts Analytics.

Western Canadian supply, including diluent, is expected to rise by 410,000 b/d in 2021 on average, and by an additional 110,000 b/d in 2022, according to Platts Analytics.