By Nia Williams
CALGARY, Alberta, Jan 10 (Reuters) - Enbridge Inc has approved a new stream of heavy Canadian crude for export onone of its major oil pipelines to the United States, accordingto four trading sources. The only problem? No one wants it.
Canada produces more heavy than light crude because of itsvast oil sands projects in northern Alberta. Space on theEnbridge system for heavy barrels is in short supply, withcongestion set to worsen as oil sands production grows.
Enbridge's plan to squeeze more heavy crude onto itspipelines by shipping the new grade is its latest attempt toresolve bottlenecks in the 2.85 million barrel per day (bpd)Mainline system, traders in Calgary said. The system ships thebulk of Canada's crude exports to the United States.
Limited pipeline capacity has lead to a glut of crudebuilding up in storage in Alberta, widening the discount onCanadian producers' oil and has deterred some companies likeRoyal Dutch Shell and Statoil ASA frombuilding oil sands projects altogether.
Since late last year shippers have had the option ofshipping the new blend known as Canada Heavy Sweet (CHS) crudeon Enbridge's Line 3, which can carry up to 390,000 bpd ofprimarily light crudes from Alberta, to Superior, Wisconsin, andis currently underutilized.
Some refiners had inquired about the new crude but so farnobody has bought any, one source at a Canadian oil logisticsfirm said.
Refiners are unsure about the quality of the CHS blend andalso are concerned about how it would be impacted throughcommingling with other batches of different crude blends shippedon Line 3.
To buy it, refiners would need to see cheaper prices, hesaid.
Refiners are typically wary of processing new crude blendsas their impact on expensive catalysts used to make fuel fromcrude is untested.
The proposed blend is no exception, said Randy Segato,president of the Canadian Crude Quality Technical Association.
"No refiner is going to jump on this until they know what itlooks like," Segato said. "The general specifications areunique."
Segato said CHS appeared to be a blend of very light sweetconventional crude with a conventional lower tan (total acidnumber) heavy crude, and perhaps medium and possibly somesynthetic crudes too.
BP suggested the unusual blend of light sweet andheavy crude to Enbridge, three trading sources said. BPprocesses tens of thousands of barrels a day of Canadian crudein its U.S. refineries.
BP did not respond to a request for comment but the tradingsources, who are all shippers on the Enbridge system, said thecompany could potentially use the blend at its 413,500 bpdWhiting, Indiana, refinery, one of the largest consumers ofheavy Canadian crude.
A handful of companies with blending facilities and storagetanks in Alberta could blend the CHS crude, should refiners showinterest in buying it, sources said.
Enbridge is always looking for more space on its pipelinesystem and has talked before about needing more heavy crudecapacity, but could not speak to specific products or lines asthat was client information and commercially sensitive, acompany spokeswoman said.
Enbridge has already added more than 400,000 bpd of extracapacity since 2014 by optimizing its pipeline network. TheCanadian government recently approved one new pipeline projectfor Enbridge and one for Kinder Morgan.
Even so, market access for Canadian crude producers isexpected to be tight for years to come.
New crude streams are usually driven by changing output asoil projects come on line, and each new blend must go throughEnbridge's quality approval process. (Additional reporting by Catherine Ngai and Liz Hampton;editing by Simon Webb and Phil Berlowitz)