Company to assess support for a further expansion to the East Coast
CALGARY—Enbridge Inc. is closing in on an application for regulatory approval to move growing volumes of crude from the West to refineries in Quebec, as customers indicate “strong support” for its pipeline proposals, chief executive Pat Daniel said on Wednesday.
Daniel said a filing to the National Energy Board to fully reverse the company’s Line 9 pipeline so it flows from Sarnia, Ont. to Montreal could come soon.
“It will be sooner rather than later because it’s very important for those Montreal refineries and the jobs and opportunities around them to have access to the best available crude, and right now that is western Canadian and Bakken crude,” Daniel said from Toronto on a conference call with media, following the company’s annual general meeting.
Daniel, who earlier in the day said the company will assess an additional potential link all the way to the East Coast “over the long term,” noted it’s too soon to put a figure on how much crude might eventually flow east. Rival TransCanada Corp. is proposing similar measures to move burgeoning supplies of discounted continental crude to eastern refineries looking to replace more expensive imports of globally priced feedstock.
“The volumes are changing almost daily as a result of ramp-ups in production in the Bakken, the oilsands even unconventional and tight supply in Alberta, so the supply is changing,” Daniel said. “And on the demand side, U.S. refineries as they go from, in some cases, light to heavy processing capacity, change the dynamics.”
Canada’s second largest pipeline company, together with its U.S. affiliate Enbridge Energy Partners, L.P., is pencilling in spending of $2 billion or more to deliver oil from Western Canada and the U.S. Midwest to eastern refineries, Daniel’s successor in the top executive post, president Al Monaco, said.
Opening access for western producers to refineries in Eastern Canada, Michigan and Ohio could represent the next wave of spending for Enbridge, following its $5.2-billion Gulf Coast initiative, Monaco said on a call with analysts and media to discuss first quarter results that beat analyst expectations.
The so-called Eastern Access project envisions a full reversal of the 240,000 barrel-per-day Line 9, following a partial reversal by next spring that will mean up to 200,000 barrels per day crude flow from Sarnia to Westover, Ont.
It would also include expanding the company’s roughly 500,000 barrel-per-day Line 5 from Superior, Mich. to Sarnia by about 50,000 barrels per day, increasing capacity of the U.S. main line Line 6B, and an extension of the Line 17 that begins in Stockbridge, Mich., all the way to Toledo, Ohio, on the western shores of Lake Erie.
Monaco, who will replace the retiring Daniel later this year, hinted that further announcements could be coming on eastern Canadian pipeline access.
“The first couple steps in our strategy there have already been announced and there are a few more shoes to drop,” Monaco said, calling the plan a “strong growth area” for the company.
Research analyst Juan Plessis of Canaccord Genuity said it’s too early to estimate the financial impact of the Eastern Access project, given further announcements are expected, but suggested the company’s next wave of spending might impact growth targets from 2015 onward.
“We’ll have to wait and see what they have in mind,” Plessis said.
Daniel said the company will assess commercial support to expand the project and potentially reach coastal refiners in New Brunswick and Philadelphia but said it’s “yet to be determined” whether that would mean new pipeline construction or connecting to an existing network.
Shares of Enbridge rose seven cents to close at $39.77 on the Toronto Stock Exchange Wednesday after the company reported quarterly profit above market expectations as it transported more liquids.
Enbridge said warmer weather, which contributed to low gas prices, hurt its gas distribution business.
Net income in the first quarter fell 27 per cent to $264 million, or 34 cents per share, on hedging losses.
Adjusted income, however, rose 14 per cent to $376 million, or 50 cents per share, beating analysts’ average expectation of 48 cents, according to a poll by Thomson Reuters. The company said it is on track to achieve full-year adjusted profit of $1.58 per share to $1.74 per share.
