Enbridge to bring Permian Basin natural gas to U.S. Gulf Coast

Pipeline giant Enbridge Inc. has signed a deal to form a joint venture to help connect Permian Basin natural gas to liquefied natural gas export terminals on the U.S. Gulf Coast.

The Calgary-based company said Tuesday it will partner with global investment manager I Squared Capital and U.S. pipeline firms WhiteWater and MPLX LP.

Enbridge has been bullish on both natural gas and LNG in recent years, repeatedly stating it believes demand for natural gas is not going away any time soon.

The Canadian company currently supplies natural gas to five operating LNG export facilities on the U.S. Gulf Coast and has previously said it is interested in expanding its export strategy through further acquisitions in the region.

Under the deal, Enbridge will contribute to the joint venture its proposed Rio Bravo pipeline project — which would transport natural gas to an LNG export facility currently being constructed by developer NextDecade at the Port of Brownsville in South Texas — as well as $350 million (U.S.) in cash. Enbridge will also fund the first $150 million of the post-closing capital spending to complete the Rio Bravo project.

The joint venture will also hold the Whistler pipeline — which began operations in 2021 and runs from the Permian Basin to Agua Dulce, Texas — as well as a 70 per cent interest in the ADCC intrastate pipeline to Corpus Christi, Texas, and a 50 per cent stake in the Waha gas storage facilities.

Under the terms of the deal, WhiteWater/I Squared will hold a 50.6 per cent interest in the joint venture, while MPLX will own 30.4 per cent.

In addition to receiving a 19.0 per cent equity interest in the joint venture, Enbridge will keep a 25 per cent economic interest in the Rio Bravo project.

In a news release, Enbridge’s chief financial officer Path Murray said the deal will be immediately accretive to cash flow as well as paving the way for future growth opportunities.

The deal is expected to close in the second quarter of 2024, subject to regulatory approvals and other customary closing conditions.

Enbridge CFO Path Murray said the deal will pave the way for future growth opportunities