Enbridge said on Friday it plans early next year to formally gauge commercial interest in a second phase of capacity expansion on its Mainline crude pipeline network.
The Calgary, Canada-based pipeline operator said if the project goes ahead, it could add 250,000 barrels per day of additional capacity on the Mainline by 2028, helping to meet rising demand for export access from Canadian oil shippers.
The project would be in addition to a planned first phase of expansion, on which the company expects to make a final investment decision before the end of the year. The first phase would add 150,000 bpd of capacity and be placed into service by 2027, Enbridge said.
Enbridge missed third-quarter profit estimates on Friday, pressured by higher financing costs from capital investments including US gas utility acquisitions.
But the company said its Mainline pipeline, which has the capacity to move three million barrels per day of crude from Western Canada to markets in Eastern Canada and the US Midwest, shipped a record 3.1 million bpd on average during the quarter, reflecting strong customer demand for Canadian oil.
Canada’s oil sands industry has shown resilience during the global oil industry downturn, buoyed by years of investment that have made it among the lowest-cost basins in North America.
Canadian oil production hit a record high of 5.1 million bpd on average last year, and Enbridge is forecasting the country will see 500,000 to 600,000 bpd of supply growth by the end of the decade.
The Canadian Government is in talks with the oil-producing province of Alberta, which wants to see a new crude pipeline built in tandem with a massive carbon capture and storage project aimed at lowering local emissions from the oil sands.
No private sector proponent has indicated willingness to build such a pipeline, but the federal government on Tuesday said it could scrap a cap on oil and gas emissions in favour of other measures like strengthened industrial carbon pricing.
Optimising the Mainline pipeline is the "quickest and most cost-effective way" to address Canada’s rising oil production, said Enbridge Executive Vice President Colin Gruending, on a conference call.
If the Canadian Government does scrap some of the regulatory and policy hurdles that have inhibited investment in the sector in recent years, he said, even more pipeline space could be required.
"There could be much more upside to monetise the trillions of dollars of value up in northern Alberta," Gruending said.
Enbridge reported adjusted core profit of CA$2.31 billion ($1.65 billion) from its liquid pipelines unit, down from CA$2.34 billion a year earlier, due to lower contributions from the Flanagan South and Spearhead pipelines.
The company reported adjusted profit of CA$0.46 per share for the quarter ended September 30, missing analysts’ average expectation of CA$0.51per share, according to LSEG data.
(Reporting by Amanda Stephenson in Calgary and Pooja Menon in Bengaluru; Editing by Pooja Desai and Bill Berkrot)
