CER decision could create opportunitites for SUThe CER is expected to provide its long awaited ruling on ENB's request that the Mainline be allowed to change contracting of its pipeline from a monthly nomination system to a common carrier system.
A monthly nomination system has been in place for 70 years. In the past, when crude production exceeded the capacity of the pipeline to move the oil, which has been the case for a long time as the US wouldn't allow Canada to build new egress for oil, ENB had to allocate shipper requests as a percentage their demand. The system lead to bottlenecks which lead to WCS prices trading up to $50 per barrel discounts.
A common carrier system, which is the norm in the USA and for TMX, allows for lower prices because carriers can count on full pipelines.
See: https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/102921-future-of-canadian-crude-pricing-at-stake-in-november-ruling-on-enbridge-pipeline-proposal
ENB has requested that 90% of capacity on the Mainline be subjected to long term (20 year) take or pay contracts. The system will benefit large producers (like SU) and large US refineries in the mid-west with lower shipping rates which means higher returns. The system could significantly hamper small producers as they get squeezed out because they don't have the size or financial clout to take on or compete for 20 year contracts.
The CER doesn't have to pick "common" or "monthly" as they dictate a compromise. The concensus seems to be that a compromise of a 20% of capacity be reserved for monthly nominations.
SU as a major player should win from the lower rates from contracting. The Mainline alread supplies SU's refineries in Sarnia and Montreal.
SU could also benefit from small producers being squeezed as they have to use more expensive rail shipping when the supply of oil exceeds the supply of egress via pipelines.
The article above notes that for November, shipper requests have to be reduced by 12%. That is a very low number from a historical perspective and is due to the fact that the opening of the new Line 3 capacity has reduced the bottleneck. When the TMX opens, more egress will come on line.
If I'm reading this right, a CER decision in favour of ENB's request to allocate 90% of its capacity of the Mainline to common carrier status will likely put a significant burden on small Canadian producers who may be faced with problems gaining egress for their oil until the TMX is completed.
IMO, it would be unfair for the CER to put ENB at a disadvantage to TMX and US pipelines by disallowing ENB's request to become a common carrier. In order to protect small Canadian producers, my guess is that the CER will mandate a 20% allocation to monthly nominations which would be subject to revision downwards when the completion of the TMX expansion is completed.
If the CER mandates ENB's request of only 10% to monthly nominations, there might be an opportunity for SU to pick up some production. Could the decision affect the possibility of SU picking up Tech's 23.1% ownership of Fort Hills as a result? There is no way Teck is going to commit to a 20 year take or pay common carrier contract when they have clearing guided that they are exiting the oil business.
With ESG in the mind's of politicians (is that an oxymoron?), increasing production by opening up new properties is very unlikely (Teck showed us that this year). However, shifting ownership from parties that want out to parties that want into the game doesn't affect the gross amount of GHG, so political noise would likely be limited. As an example, nobody blinked when Cenovus took over Husky this year.