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Enterprise Mulls Seaway Tariff Hike, Completes Pipe Portion of Midland-to-Sealy Pipeline

Enterprise Products Partners LP said it may consider raising tariffs of its Seaway Pipeline, one week after a competitor, TransCanada Corp., told federal regulators that it wants to increase the temporary discounted spot rate for light crude from Cushing, OK, to Houston and Port Arthur, TX.

Meanwhile, the Houston-based partnership said it recently completed construction of the pipeline portion of its Midland-to-Sealy crude oil pipeline, and Hurricane Harvey delayed the commissioning schedule for its propane dehydrogenation (PDH) facility at Mont Belvieu, TX, by about four weeks.

During an earnings call to discuss 3Q2017 on Thursday, senior vice president Brent Secrest said Enterprise is "evaluating the tariffs we have right now" on the 850,000 b/d Seaway system, which runs from Cushing to the Gulf Coast. 

"We're lower than our competitor," Secrest said, referring to TransCanada. "Ultimately, I think we benefit because of our presence on the water."

CEO Jim Teague added that Enterprise has "the right partner" in Enbridge Inc., "because he has the pipe out of Canada and he is positioned to bring Canadian crude into Seaway down to the Gulf Coast." Calgary-based Enbridge is a 50/50 joint venture partner with Enterprise on Seaway.

Last week, Marketlink LLC, a TransCanada subsidiary, submitted a tariff filing with FERC where it proposed raising the temporary discounted spot rate for light crude to $3/bbl, up from $2.50/bbl. The increase would take effect on Dec. 1. Marketlink told the Federal Energy Regulatory Commission [IS18-18] that it would leave the spot rate for heavy crude unchanged, at $3/bbl. TransCanada launched an open season for the 700,000 b/d Marketlink on Wednesday.

Secrest added that Enterprise has a marketing contract on Seaway that ends in January, but it would not be renewed.

"There's a lock-up tariff that if we want to participate, we'll participate that way," said CFO Bryan Bulawa. "There is probably an opportunity to sell it long term to third parties as capacity rolls off.

"The issue with Seaway is there is more capacity that's coming on line. In terms of excess capacity, there's probably not a whole lot for another year or two. There is lock-up space obviously, and at the end of the day if Enterprise chooses to participate in that, we'll participate as we offer dock services to people."

Teague said Enterprise was beginning commissioning activities for the Midland-to -Sealy pipeline, and that the company expects it to enter limited service later this month. He said construction of supporting pump stations and storage facilities -- both in Midland and Sealy, TX -- are continuing. The pipeline is expected to enter full service in 2Q2018.

The CEO added that Enterprise was also "in the final stages of commissioning" at its PDH facility at Mont Belvieu, "and [we] expect initial production of polymer grade propylene later this month."

The partnership transported 5.3 million b/d of natural gas liquids, crude oil, refined products and petrochemical pipeline volumes in 3Q2017, a 6% increase from the year-ago quarter (5 million b/d).

Enterprise reported net income of $611 million (28 cents/unit) in 3Q2017, compared to net income of $635 million (30 cents/unit) in the year-ago quarter. Adjusting for the estimated impact of Hurricane Harvey, net income would have been $646 million (30 cents/unit).

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