May 9, 2012 / 4:58 PM / 5 years ago

Enbridge mulls another pipe reversal as profit rises

CALGARY, Alberta (Reuters) - Enbridge Inc (ENB.TO), whose lines move the bulk of Canada’s crude oil exports to the United States, said on Wednesday it would want to play a role in any potential reversal of the massive Capline oil pipeline as it looks to move oil sands crude to refineries on the eastern Gulf of Mexico coast.

The company, which reported a better-than-expected 14 percent rise in first-quarter adjusted profit on Wednesday, said it would be interested in participating in any acquisition of the underused 630-mile line that now takes oil from Louisiana to southern Illinois.

“We definitely could benefit from it,” Pat Daniel, Enbridge’s chief executive, said on a conference call. “There are issues to be resolved around existing refineries along Capline and where they get their crude from, but we’re watching and monitoring that one very closely.”

With production from Alberta’s tar sands set to rise to nearly 2.7 million barrels per day by 2015 from a current 2 million bpd, Enbridge and its rivals are looking for ways to move Canadian oil away from the U.S. Midwest market - where a glut of crude has depressed prices - and into the Gulf Coast refineries.

The Capline, operated by Royal Dutch Shell Plc (RDSa.L), once carried as much as 1.2 million barrels of oil per day to Midwest refineries. But shipments have dwindled to under 200,000 bpd as Canadian and Bakken crudes supplant the more expensive imported and Gulf of Mexico supplies that the line ships.

The low volume has raised speculation that the line could be better used to carry Canadian and North Dakotan crude to Louisiana refineries. Daniel said Enbridge has often looked for ways to send Canadian crude to the eastern Gulf coast and its existing pipelines could feed crude to the reversed line.

To be sure, the line’s current customers have not yet backed a reversal and no one has stepped forward to acquire the line or take charge of a project to reverse it.

Earlier this month Marathon Petroleum Corp (MPC.N), which owns a stake in the line, said Capline remains an important supply link for its 212,000 bpd refinery in Catlettsburg, Kentucky.

SEAWAY REVERSAL

Enbridge said it still expects to begin taking crude from the Cushing, Oklahoma, storage hub to refineries on the Texas Gulf coast next week on the Seaway pipeline it and Enterprise Product Partners LP (EPD.N) are reversing.

Though it will initially carry 150,000 bpd, the Seaway line will be expanded to ship up to 850,000 bpd. Enbridge also plans boost the size of its 193,000 bpd Spearhead line from Flanagan, Illinois, to Cushing to carry as much as 775,000 bpd of Canadian crude to the storage hub to supply Seaway.

Enbridge is also expanding its network through such projects as the planned C$5.5 billion ($5.5 billion) Northern Gateway project, which would take 525,00 bpd of oil sands crude to a deepwater port at Kitimat, British Columbia.

The Canadian government recently introduced measures to speed regulatory approvals for projects like Northern Gateway, but the company does not expect the new rules will affect the timing of the project, which could be in service in 2017.

SHARES RISE

Enbridge said first quarter net income fell 27 percent to C$264 million, or 34 Canadian cents per share, on hedging losses.

But adjusted income rose 14 percent to C$376 million, or 50 Canadian cents per share, beating analysts’ average expectation of 48 Canadian cents, according to Thomson Reuters I/B/E/S.

The company said it is on track to achieve full-year adjusted profit of C$1.58 per share to C$1.74 per share.

Enbridge shares were up 32 Canadian cents at C$40.02 by midday on the Toronto Stock Exchange.

($1 = $1.00 Canadian)

Reporting by Scott Haggett and Bhaswati Mukhopadhyay in Bangalore; Editing by Janet Guttsman

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