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When a pipeline can be good for tankers

When a pipeline can be good for tankers
The word pipeline can strike fear into the hearts of tanker owners as they envisage the loss of long haul crude demand - four years ago it was Russian announcements of a deal to supply 300,000 barrels per day (bpd) to China via the Chinese spur under construction to the East Siberia Pacific Ocean (ESPO) pipeline.

At the same time as the ESPO was being completed a new pipeline was being built west to the Baltic. The combined capacity when in full operation will be 2.6m bpd, with much of it substituting long haul crude into Asia.

However, not every pipeline proposal is bad for the tanker market. London broker EA Gibson reviews progress in one that could be a positive boost. The controversial Enbridge Northern Gate project in Canada is nearing decision time after the governmental and public consultation process comes to an end shortly.

The proposal involves building a twin pipeline 1,177 km connecting Bruderheim in the Alberta oilfields to Kitimat on the Pacific coast providing 525,000 bpd for export with first cargoes as early as end 2016. Initial estimates suggest the annual Northern Gate requirement at 50 VLCC cargoes, 120 suezmax cargoes and 50 aframax cargoes.

Enbridge has had to work hard on the safety aspects of the $6bn pipeline, in particular the risk of another Exxon Valdez. The approach to the terminal is through the Douglas Channel - a wide fjiord similar to Prince William Sound in Alaska where the Exxon Valdez grounded.

Further down the line there is a project to build a refinery to process bitumen from oil sands into products for tanker export, also near Kitimat. This is arousing strong opposition on environmental grounds but the economic case is also very strong. Neither are done deals yet but this pipeline can be viewed with some optimism for the tanker market says the broker.