Enbridge eyes pipeline expansion after merger with Spectra Energy

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Enbridge Inc. is mulling expansion of a major export pipeline, in the first sign of how the company plans to use its scale after a $37-billion merger with Spectra Energy Corp.

Chief executive officer Al Monaco said in an interview that the company is assessing a range of opportunities as it looks to integrate Spectra's sprawling network of pipelines and processing infrastructure into its own operations. They include a possible expansion of the newly acquired Express pipeline from Alberta to Wyoming.

The potential for pipeline growth comes as oil sands production once again nears the upper limits of existing capacity, a situation analysts say will ultimately weigh on prices for the extra-heavy crude as producers pay more to ship barrels by train.

Enbridge currently transports the bulk of Alberta crude to U.S. markets along its 2.85-million-barrel-per-day mainline network, on which deliveries regularly get curtailed ‎during periods when demand to ship oil exceeds available space.

Though there are no firm plans to do so, Mr. Monaco said it's possible the company could expand Express, which runs more than 1,250 kilometres from Hardisty, Alta., to Casper, Wyo., and has capacity of 280,000 barrels.

"We're looking at that at the moment," he said at the company's Calgary headquarters. "Now that we've closed the deal, the first priority has been: Okay, how can we see how one and one equals more than two?

"We've got a major conduit with our mainline system. We've got another conduit now into the [Midwest] market. There may be some opportunities to optimize between the two, and so we're thinking about ways that we can do that."

Enbridge expects to offer more detail about integration and future growth opportunities at an investor day scheduled for Thursday in Toronto.

It is studying options as plans for new pipelines get bogged down by legal and political wrangling, with environmentalists and First Nations saying such projects will undercut efforts to reduce carbon emissions from Alberta's energy sector.

Projects facing resistance include Enbridge's Line 3 replacement, which the company has said won't start up until 2019. The $7.5-billion project, approved last year by Prime Minister Justin Trudeau, would add 370,000 barrels per day of new capacity between Alberta and Superior, Wisc.

But it faces legal challenges from the Manitoba Métis Federation and the Association of Manitoba Chiefs, who are seeking to overturn federal approvals for the Canadian portion of the route. The project also needs final clearances from regulators in Minnesota.

Similarly, rival Kinder Morgan Inc.'s plan to nearly triple the flow of crude between Edmonton and the Pacific coast on its Trans Mountain pipeline has encountered new roadblocks.

The Houston-based company insists the $7.4-billion expansion will start up by 2020. But B.C.'s Green Party and New Democratic Party have pledged to kill it once they wrest power from the weakened Liberals, although it remains unclear exactly how.

Despite the political manoeuvring, Mr. Monaco said B.C. remains a promising region for natural-gas growth.

Enbridge now has a bigger footprint in the key Montney exploration zone, where producers have been hampered by weak prices and pipeline constraints, stoking demand for new services.

The company is currently testing shipper interest for a possible expansion of the B.C.-to-Chicago Alliance pipeline system, in which it owns a 50-per-cent stake. Mr. Monaco also said major liquefied natural-gas projects will eventually be built on the northern coast, even though proponents have put off investments.

"I think everybody focuses on short-term natural-gas prices, but the reality is the cost of finding and developing natural gas in B.C. and Alberta is very, very low," he said, making global LNG exports more appealing.

"There's so much gas being produced into the Alberta market. Producers, I think, have come to the conclusion that it needs to go elsewhere."