Enbridge at ‘maximum capacity’

Oil pipelines full, and will be through 2020

CALGARY• Canada’ s biggest pipeline export system is full and will remain so even if owner Enbridge Inc. succeeds in completing its Line 3 project, currently awaiting approval in Minnesota.

Enbridge CEO Al Monaco said Friday that the company’s mainline system delivered a record-setting amount of crude from Alberta to refineries in the U.S. Midwest in December and the system would be full for at least the next three years.

“In December the combination of growing (Western Canadian) supply and strong refinery demand drove record deliveries of 2.733 million barrels per day which is close to maximum capacity,” Monaco said on an earnings call of his company’s mainline, the biggest export pipeline system for Canadian oil.

“January and February volumes look pretty strong as well and we expect the system will essentially be full for the rest of the year. In fact, we expect that to be the case through 2020, including our Line 3 given growing supply and lack of other pipeline capacity before them,” Monaco said.

Line 3 is a replacement project for an existing pipeline route and would roughly double the capacity of the stretch to 760,000 barrels per day at an anticipated cost of $7.5 billion.

Enbridge expects regulators in Minnesota to make a decision on the line in the second quarter of this year and expects the line will be shipping oil between Alberta and Wisconsin in 2019.

Monaco’s statement that his company’s pipelines would remain full until 2020 were aimed at long-term concerns for Enbridge’s mainline, and whether utilization would slip if competing pipeline projects are built.

Those competing projects include TransCanada Corp.’s Keystone XL and Kinder Morgan Canada’s Trans Mountain expansion – also mired in regulatory challenges in Nebraska and British Columbia, respectively.

Monaco said that even if competing pipelines are built, Canadian heavy oil producers generally receive $5 more per barrel of oil at the refineries connected to Enbridge’s mainline than elsewhere. As a result, Monaco said, he expects oil producers will continue to demand space on the mainline.

While Enbridge’s mainline is expected to remain full over the coming years, the company earned less money in the quarter from its liquids pipeline business than RBC Dominion Securities analyst Robert Kwan expected. Kwan expected Enbridge’s liquids pipeline business would earn $1.54 billion but it only pulled in $1.48 billion, and overall earnings were lower than expected.