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Fire shuts main Canada-U.S. crude oil pipeline

Reuters

Thursday, November 29, 2007

NEW YORK — A fire and explosion in Minnesota on Wednesday forced Enbridge to shut most of the main pipeline that supplies Canadian crude to Midwest refineries, halting nearly a fifth of U.S. imports and sending prices up $3.

Two Enbridge employees were killed in the explosion and fire, the company said in a statement. A spokeswoman for the county said the fire could burn for another three days.

The workers had been conducting repairs on an underground pipeline when fumes apparently escaped and ignited the blaze, said Kristine Chapin, a spokeswoman for the state Department of Public Safety. The victims' names weren't immediately released.

Calgary-based Enbridge Inc. said all its lines in the vicinity of its Clearbrook, Minn., terminal — Lines 1, 2, 3, and 4 — were immediately shut down and isolated.

Those are the main trunk lines that carry an estimated 1.9 million barrels per day (bpd) of Canadian crude to the United States.

One of the set of four pipelines will require repairs and regulator inspections, while the largest is "not likely" to start up any time soon, Larry Springer, a spokesman for Calgary, Alberta-based operator Enbridge Inc, said on Thursday.

The smaller two lines were several hundred feet from the fire and appear to be undamaged, but will be inspected soon before they are restarted, Mr. Springer said by phone.

Denise Hamsher, a spokeswoman for Enbridge Energy, confirmed late Wednesday the workers who died were employed by the company.

“Right now, we are securing the site and making sure that we are dealing with our employees and doing whatever we can to offer the families [of the victims] whatever assistance they need,” Ms. Hamsher said.

The explosion took place about five kilometres southeast of the Clearbrook terminal, Enbridge said, adding that appropriate authorities and emergency officials had been notified. The company said it was working with federal and state authorities to begin a thorough investigation.

“The area under fire now is 100 feet by 100 feet, it is anticipated to burn for up to three days,” Jeanine Brand, County Attorney and Public Information Officer for Clearwater County, told Reuters by telephone.

Oil prices rose more than $3 (U.S.) a barrel in early Thursday trade on fears that the disruption would tighten supplies, rebounding from a nearly $4 fall a day ago. U.S. crude jumped $3.54 to $94.14.

Canada is the biggest supplier of foreign crude to the United States, accounting for almost one-fifth of its over 10 million bpd of imports, government data show.

Nearly all of that is delivered via the Enbridge system.

According to the Enbridge website, Lines 1, 2, 3 and 4 have a capacity to carry slightly over 1.7 million bpd of crude oil, natural gas liquids and oil products.

“My initial impression is that [this] will put a halt to the slide in oil prices and put us back on the march towards $100 a barrel,” ANZ senior commodities analyst Mark Pervan said. “The timing is pretty bad. We are coming to the strongest demand period for crude with the approach of the northern winter.”

Previous disruptions caused by leaks on the Enbridge system earlier this year have been patched up quickly enough to avoid any significant impact on customer deliveries.

A prolonged outage could have a significant market impact. The Cushing, Okla., delivery point for New York Mercantile Exchange oil futures is located in the Midwest, although the Enbridge line does not flow directly there.

The fire occurred at a main juncture in the line shortly before the U.S. portion splits into a network of pipes that runs to refiners in Chicago and the U.S. Midwest, a landlocked region that has few other immediate sources of supply.

It supplies 62 per cent of the crude refined in the Chicago area and 82 per cent of Ontario's demand, according to the website of U.S. arm Enbridge Energy Partners L.P The Enbridge System in Canada consists of 8,000 kilometres of mainline pipe and connects to the 5,600-kilometre Lakehead System in the United States.

The cause of the explosion has not been determined, Enbridge said, but Clearwater County's Brand said it was due to a leak.

“Apparently, there was an oil leak within the last couple of weeks, crews were around when they finished, and they pressured the pipeline, and crude started spilling from the pipeline, oil sprayed and created an oil spill,” she said.

With files from Associated Press

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