Enbridge CEO calls for patience as western oil glut ‘screams’ for solution

Enbridge Inc. is looking at options to help clear a glut of oil in Western Canada — including reversing a condensate import pipeline — but CEO Al Monaco counselled patience Thursday as all solutions will take time to put in place.

The pipeline company reported adjusted earnings of $933 million in the third quarter, up from $632 million a year ago, in part because of increased crude volumes and revenue on its Mainline system out of Western Canada.

“From what we see from our vantage point, storage levels are at a record high and while rail is providing some relief, it’s not enough to bring in the very wide discount (prices),” said Monaco on a conference call to discuss results.

“All of that means our Mainline is running very full these days for both heavies and lights. It’s not news that these price dislocations ... scream for new infrastructure and that’s what we’re focused on.”

Several producers have announced they will reduce production in view of heavy oil spot price discounts that have ballooned to as much as US$52 per barrel compared with U.S. benchmark prices. Light oil discounts have also hit multi-year highs.

Enbridge expects to obtain final permits in Minnesota in time to begin construction in the first quarter on its $9-billion Line 3 replacement export pipeline, which would allow it to be in service in the fourth quarter of 2019.

The project is to add more than 370,000 barrels per day of export capacity but that won’t be enough to match demand based on the Western Canadian supply growth outlook, Monaco said.

He said Enbridge is looking at adding another 200,000 bpd of capacity by using drag reducing agents in its pipeline and redirecting some downstream injections to open up long-haul capacity for Western Canada, along with lowcost pipeline and pumping station upgrades that could add another 125,000 barrels a day of capacity by the early 2020s.

The company has also recently “ramped up” its evaluation of converting its Southern Lights condensate import pipeline into a crude oil export pipeline with capacity of about 150,000 bpd.