As Trans Mountain faces delays, Enbridge sees “extra wind” for its Mainline system

Calgary-based energy infrastructure firm Enbridge Inc. said Friday that if the launch of the Trans Mountain pipeline expansion is significantly delayed. can benefit from increased volumes in its main pipeline network.

Enbridge, like the rest of Canada's energy sector, has been closely following recent developments at the Trans Mountain project. The high-profile pipeline expansion will increase Trans Mountain's capacity from 590,000 bpd to a total of 890,000 bpd, creating new oil transportation competition for Enbridge and its Mainline system, but the project has been plagued by delays and rising construction costs.

Recently, Trans Mountain Corp. B.C. has reported new construction challenges that will delay the pipeline's expected first-quarter launch until the second quarter of this year.

Colin Gruending, president of Enbridge's liquids pipeline business, said Friday that the company expects an April 1 operational date for Trans Mountain. He said if that date is pushed back, Enbridge could experience a slight increase in delivery volumes.

“The longer it (Trans Mountain) is delayed, it's a bit of a headwind,” Gruending said on a conference call to discuss Enbridge's fourth-quarter earnings.

“We think we're going to be pretty full anyway, so a little bit of a delay isn't going to provide massive growth for us. But there are some good sides to it.”

The Enbridge Mainline is Canada's largest oil pipeline system, providing approximately 70 percent of the total oil pipeline capacity from Western Canada. Demand for long-haul transportation of oil to markets in eastern Canada and the US Midwest has exceeded capacity over the past few years. However, the line is expected to lose barrels to Trans Mountain once the expansion project gets underway.

But Gruending said that picture has changed because of the Trans Mountain delay. The pipeline project was originally supposed to be completed in 2022, and construction delays have given Canadian oil producers more time to ramp up production in anticipation of additional export capacity.

“I think the idea that the highway will lose a little bit of volume when the (Trans-Mountain) is added is a bit of an outdated concept. It may have been a vision a few years ago, but it's been delayed a lot,” Gruending said. .

“And during that multi-year lag period, supply has grown structurally and steadily… There's that demand. He is basically insatiable.'

Statistics Canada shows that Alberta's oil production will reach a new record of 3.82 million barrels per day in 2023. In December alone, Alberta produced 4.19 million barrels of oil per day, up 10 percent from last year.

A report released by Deloitte Canada in October said Canadian oil production is expected to grow by about 375,000 barrels per day over the next two years, more than the total added to Canada's output over the past five years.

Enbridge anticipates that its Mainline system will operate at capacity for most of 2024 at a capacity of three million barrels per day.

In December, Enbridge applied to Canada's energy regulator to approve a new tolling deal for the Mainline system. Tolls are fees that oil companies pay to ship their products through pipelines and are a way for pipeline operators to make money.

Enbridge has been negotiating a new tolling system with oil industry customers for a year and a half. Once finalized and approved by the regulator, the new tolling agreement will be in effect until 2028.

Enbridge reported a fourth-quarter profit of $1.73 billion, or 81 cents, per share on Friday, compared with a loss a year ago when it took a large charge from a non-cash goodwill impairment charge.

The result was attributable to its gas transportation business, compared with a loss of $1.07 billion, or 53 cents per share, in the final three months of 2022, when the company took in $2.5 billion.

On an adjusted basis, Enbridge said it earned 64 cents per share in the quarter ended Dec. 31, compared with adjusted earnings of 64 cents a year ago.

Last month, the company said it would cut 650 positions due to what it called “extremely difficult business conditions” due to geopolitical instability, persistent inflation and rising interest rates.

This report by The Canadian Press was first published on February 9, 2024.

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Amanda Stevenson, The Canadian Press