But an energy analyst says the expansion will only go a small way toward easing a bottleneck that has slowed the southward flow of crude and squeezed the profits of Canadian and U.S. oil producers to the north.
"This is the first step in several that are going to be needed for the markets to really get back to where they should be," said Lanny Pendill of Edward Jones in St. Louis. Mo.
"So incrementally, it's certainly a positive, but we still are going to require a lot more takeaway capacity to the Gulf Coast to have a meaningful impact."
Burgeoning light oil volumes from the Bakken, a shale formation that stretches through parts of North Dakota, Montana and Saskatchewan, have been unable to find an outlet due to a dearth of pipeline capacity.
That has pushed down the price of West Texas Intermediate, the key U.S. light oil benchmark that is priced at Cushing, compared with other varieties of crude, such as Brent in the North Sea, that can travel to the most lucrative global markets by tanker.
And that dynamic has rippled further north to the Alberta oilsands, where producers are doubly discounted because their oil must go further to get to market and is more difficult to process.
Last spring, Enbridge and Houston-based Enterprise Products Partners reversed the flow of the Seaway pipeline, which was previously configured to ship imported crude from the Gulf Coast north to Cushing.
Since about last May, 150,000 barrels per day have flowed in the opposite direction. With additional pumping capacity, some 400,000 barrels per day of capacity is now available to shippers.
Service on the 800-kilometre line was suspended on Jan. 2 so that the remaining pump station connections could be completed.
Enbridge and Enterprise, who each own half of Seaway, intend to twin the pipeline, bumping up its capacity to 850,000 barrels per day by the middle of next year.
That, combined with another 500,000 barrels per day along the controversial Keystone XL pipeline proposed by fellow pipeline giant TransCanada Corp. (TSX:TRP), should have a "significant impact" on the market, Pendill said.
"If you take a slightly longer term perspective and look out of the next two to three years, I think there is a great opportunity for the Canadian producers to see better prices for their product," he said.
The Obama administration rejected the original US$7.6-billion Keystone pipeline proposal about a year ago, though it invited TransCanada (TSX:TRP) to refile its application.
Concerns centred around the line's route through an environmentally sensitive part of Nebraska, and a recent state review took a generally positive view of proposed changes.
Amid the delays, TransCanada broke up the project into two parts, with construction currently underway on the US$2.3-billion southern leg between Cushing and the Gulf. That portion does not need a federal permit as it does not cross the Canada-U.S. border.
The State Department is in the process of weighing the new application for the US$5.3-billion northern portion of Keystone XL, which would run from the Canada-U.S. border to Steele City, Neb.Suggest a correction