Enbridge CEO plays down need for rivals’ pipelines
CALGARY Pipeline giant Enbridge Inc. cast doubt on the need for its competitors’ oil pipelines Friday, saying only one of its rivals’ pipelines would fill up in the medium term after Enbridge completes its own projects.
Al Monaco, Enbridge president and CEO, said his company would complete its recently approved Line 3 replacement in 2019, which would add 300,000 barrels per day of capacity on the main-line system, which ships the bulk of Canadian crude exports to the United States. But he added oil production forecasts don’t currently support multiple projects.
“Based on the current supply outlook, we believe that our postLine 3 capacity, along with future expandability and one of the other pipelines being proposed provides enough capacity well into the latter half of the next decade,” Monaco said during a quarterly earnings call.
That would mean only one of competitor TransCanada Corp.’s Keystone XL or Energy East or Kinder Morgan Canada’s Trans Mountain pipeline expansion would be required to meet additional production from domestic oil companies — once Enbridge completes its own projects.
“That should suffice based on the current supply outlook at least out to mid next decade,” Monaco said.
Oil producers and refiners would ultimately decide through volume commitments how much new pipe is needed, he said. Major oilsands producers Suncor Energy Inc. and Cenovus Energy Inc. confirmed this week that they continue to support both Keystone XL and the Energy East project.
Kinder Morgan Inc. has started talks with institutional investors including major Canadian pension funds and private equity firms to raise capital for the $6.8 billion expansion of its Trans Mountain pipeline project, people familiar with the process told Reuters. The project expansion is set to start construction later this year and will be completed by 2019.
The Canadian Energy Research Institute released a study this month showing total oil supply out of Western Canada is projected to completely fill Line 3 by 2020, then fill the Trans Mountain expansion by 2025 and fill Energy East by 2031.
Enbridge also announced Friday it would pursue debottlenecking projects on its oil main line to further boost its capacity by 175,000 bpd and said it did need oil producers to sign long-term contracts to underpin that expansion.
While Monaco downplayed the immediate need for competing pipelines, Enbridge confirmed it had paused one of its oil pipeline expansion projects on its Line 61 and is not pursuing shipper commitments on that expansion project. The company has budgeted for $27 billion of other capital projects, including Friday’s announcement of $1.7 billion for an offshore wind farm in Germany, following its merger with Houston-based Spectra Energy Corp., which is expected to close by the end of March.
Enbridge, which hiked its quarterly dividend 10 per cent Friday to 58 cents per share, announced it would increase its dividend again in the second quarter following the merger. The company also reported relatively flat net earnings for the fourth quarter of last year, pulling in $365 million during the period compared with $378 million at the same time a year earlier.
The results were significantly higher for the full year period, in which Enbridge reported net earnings of $1.7 billion in 2016 compared with a net loss of $37 million in 2015. The additional earnings came primarily from higher earnings on the company’s liquids pipelines, where full-year earnings rose 97 per cent from $1.8 billion in 2015 to $3.56 billion in 2016.
Based on the current supply outlook, we believe that our post-Line 3 capacity, along with future expandability and one of the other pipelines being proposed provides enough capacity well into the latter half of the next decade. AL MONACO, president and CEO, Enbridge Inc.