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Enbridge planning $1-billion pipeline to boost oil sands growth

“The key to oil sands growth is to ensure that there’s enough diluent,” Al Monaco, Enbridge’s chief executive, told reporters after the company’s investor day in Toronto.

Ryan Remiorz/THE CANADIAN PRESS

Enbridge Inc. wants to build a $1-billion pipeline to the oil sands designed to carry diluent  – a product needed to facilitate expansion efforts for energy projects in northern Alberta.

The pipeline company on Tuesday said it wants to build a line that would send 200,000 barrels of diluent per day between Edmonton and Fort McMurray.

Diluent is used to thin heavy crude and allow it to flow through pipelines. Without an ample supply of diluents, such as light oil, the energy industry's plans to expand bitumen production in northern Alberta could be inhibited.

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"The key to oil sands growth is to ensure that there's enough diluent," Al Monaco, Enbridge's chief executive, told reporters after the company's investor day in Toronto. "In terms of where we are on the project, I would characterize it as the commercial discussions are going very well. They are not finalized yet, but certainly, we're on the right track."

Alberta churned out roughly 1.8 million barrels of crude from the oil sands per day in 2012, according to the Canadian Association of Petroleum Producers. Output is expected to rise to 2.3 million barrels per day by 2015 and climb steadily to 5.2 million barrels per day by 2013, the lobby group says.

Enbridge's proposed diluent pipeline, dubbed Norlite, could be expanded to 240,000 barrels per day, according to the company's presentation. It has the potential to cost $1.4-billion.

The pipeline could be running by the second quarter of 2017, Enbridge said. Keyera Corp. has the option to participate in Norlite with a 30-per-cent working interest.

Enbridge also plans to spend $700-million to expand its Southern Lights pipeline to 275,000 barrels per day, up from 95,000 barrels per day. The line carries diluent from Chicago to Edmonton.

Energy companies that commit to using the pipeline are responsible for finding a source for the diluent and getting it to Edmonton, said Steve Wuori, the executive in charge of the company's liquids pipelines and major projects.

The Calgary-based company expects to spend $36-billion between 2013 and 2017. It previously predicted its growth capital plan to ring in at $35-billion between 2012 and 2016.

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The company has $26-billion worth of commercially secured projects between 2013 and 2017, it said.

Enbridge expects its dividends to grow in line with its predicted 10 per cent to 12 per cent growth in annual average earnings per share. However, it believes it can "accelerate" its dividend increases in 2017 because it expects to increase its free cash flow above what it needs to sustain its growth, Mr. Monaco said.

With files from Reuters

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About the Author

Carrie Tait joined the Globe in January, 2011, mainly reporting on energy from the Calgary bureau. Previously, she spent six years working for the National Post in both Calgary and Toronto. She has a master’s degree in journalism from the University of Western Ontario and a bachelor’s degree in political studies from the University of Saskatchewan. More

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