Exxon Mobil brings crude south

By JOE CARROLL
Bloomberg News
21-Apr-2006

Pipeline flow reversed to get oil to Texas from Canada

Exxon Mobil Corp. has reversed the flow of a U.S. pipeline to haul Canadian crude to Texas as political instability threatens supplies from nations such as Nigeria and Venezuela.

The 858-mile pipeline, which formerly carried oil from the Gulf of Mexico to Midwest refineries, began hauling crude south during the first week of this month, said Michael Tudor, president of Exxon Mobil's pipeline business.

U.S. refiners are buying more Canadian oil amid rising tensions in Iran and other oil-rich nations that boosted oil prices this week to a record.

The reversal will boost revenue for Canadian producers such as Husky Energy and Canadian Natural Resources. Some grades of Canadian crude jumped more than $12 a barrel during the first week of April as shipments began to flow south, according to figures from Peters & Co., a Calgary-based brokerage. The Gulf Coast is the heart of the U.S. refining industry and source of almost half the nation's gasoline output.

The reversal allows Canadian oil companies to ship crude to Gulf Coast refiners by pipeline for the first time, Tudor said. Previously, refiners in Texas and Louisiana used almost no Canadian crude because of the expense of hauling it down the West Coast by ship and through the Panama Canal.

The pipeline can carry 66,000 barrels of oil a day, equivalent to 13 percent of the crude processed daily at Exxon Mobil's Baytown refinery, Tudor said.