CALGARY – Enbridge Inc. and its U.S. affiliate are spending $6.2 billion on a series of projects to bring growing volumes of Alberta and North Dakota light oil to market.
The Calgary-based company (TSX:ENB) says it has enough shipper support to go ahead with its light oil market access program, which will see an additional 400,000 barrels per day of light oil flow to refineries in Ontario, Quebec and the U.S. Midwest.
“These market access initiatives reflect changing North American supply and demand fundamentals and will create significant value for our customers,” CEO Al Monaco said in a release Thursday.
Refineries in the eastern part of the continent currently rely on imported crude, which is more expensive than the domestic oil that Enbridge aims to send their way.
A supply glut of inland crude has been dampening producers’ profits, so those companies have been eager to find more lucrative markets for their oil.
Part of the plan includes building a 265-kilometre pipeline between Flanagan, Ill., south to Patoka, Ill., a launching point to connect to Midwest refining markets where there’s high demand for light oil, such as Ohio.
Initial capacity on that line, which will cost $800 million to build, will be 300,000 barrels per day and Marathon Petroleum has signed up as an anchor shipper.
The program also includes a $2.5-billion expansion to a pipeline system in North Dakota, the heart of the booming Bakken shale formation. The system will be expanded by 225,000 barrels to a total of 580,000 barrels per day. A new 965-kilometre line will be built from Beaver Lodge, N.D. to Superior, Wisc.
Production in the Bakken has grown from 200,000 barrels per day to 700,000 barrels per day in the last five years. That rate could expand to 1.2 million barrels if there were enough pipelines out of there, Enbridge said.
Another 100,000 barrels per day are expected to flow from Alberta light oil pools such as the Cardium and Viking, which have experienced a renaissance of sorts thanks to advances in drilling technology.
Enbridge is also expanding its U.S. mainline system between Superior, Wisc. and Chicago and boosting Canadian mainline terminal capacity. It’s also scaling up projects to ship more crude to Ontario and Quebec, partly by reversing the flow of its Line 9 pipeline between southern Ontario and Montreal.
The projects are expected to come in service between 2014 and 2016.
Enbridge’s U.S. affiliate, Enbridge Energy Partners (NYSE:EEP) will contribute $3.4 billion to the program.
Also Thursday, Enbridge boosted its quarterly dividend by 12 per cent to 31.5 cents per share. It also said it aims to earn between $1.74 and $1.90 per share in 2013.