October 3, 2012 / 8:08 PM / in 5 years

Enbridge CEO floats new light-oil pipeline plans

CALGARY, Alberta (Reuters) - Enbridge Inc’s (ENB.TO) new chief executive kicked off his tenure as head of the main transporter of Canadian oil exports on Wednesday with new plans to get growing volumes of light crude to Eastern markets and prospects for richer earnings.

Al Monaco, who took over as CEO on Monday, said a boom in light oil production from sources like the North Dakota Bakken has drastically altered North America’s supply outlook, forcing deep price discounts for supplies not linked to international Brent crude and prompting the need for new pipeline routes.

The company is in talks with oil shippers to get more light-grade crude to refiners in Ohio and Eastern Canada through a multibillion-dollar series of expansions and extensions of Enbridge’s pipeline network before 2015, he said.

“North America is in the process of being re-piped, both in terms of additional capacity required and the flow direction of crude and natural gas,” Monaco told investors and analysts at a company-sponsored symposium. “Enbridge is right in the middle of that transformation.”

It now has up to C$35 billion ($35.4 billion) of secured and potential projects on the drawing board, and C$27 billion of that is for crude oil and liquids transportation.

Enbridge has already announced a host of new pipelines to boost access for Canadian crude to new markets, including the contentious C$6 billion Northern Gateway line to the Pacific Coast from Alberta, now the subject of public hearings.

It also plans a C$3.2 billion series of expansions across its system to move Canadian and North Dakota oil eastward, including a reversal of Enbridge’s Line 9 between Sarnia, Ontario, and Montreal to reduce the need for pricey imported oil at Quebec and Atlantic Canada refineries.

The company is talking to shippers about next steps.

One C$2.5 billion initiative would include expanding Line 9 beyond its current 240,000 barrel a day capacity, adding rail access to U.S. East Coast refineries from Chicago and increasing the ability to move oil to the Eastern U.S. Gulf Coast, said Steve Wuori, head of the company’s liquids pipeline division.

Wuori also outlined a new C$5.5 billion “Light Oil Market Access” initiative, which would include a new pipeline, called Sandpiper, to Superior, Wisconsin, from the Bakken region. It would also expand the company’s mainline, using such pipelines as Line 62 in Illinois, Line 6B East of Chicago to southern Ontario and Line 9.

“The projects that we’ve put in this so-called highly probable category are a little bit more than just drawing lines on a slide,” Monaco told reporters following the meeting. “We’ve had good discussions with producers and refiners, and it’s a more well-developed project than just preliminary work.”

He cautioned that any proposals will face opposition from environmental and other groups, as is the case with Northern Gateway. Criticism of Enbridge’s operations has increased since the 2010 rupture of Line 6B in Marshall, Michigan, which sent 20,500 barrels of crude into the Kalamazoo River system in the costliest onshore oil spill in U.S. history.

On Wednesday, the U.S. Environmental Protection Agency ordered the company to conduct more cleanup there.

NORTHERN GATEWAY

This week, British Columbia Premier Christy Clark reiterated her opposition to Northern Gateway unless five conditions are met, including more financial benefit for her province. She has threatened to block the federally regulated project by withholding permits and electricity.

Monaco said the company is focused on the regulatory process, but believes the project can bring a lot of benefits to British Columbia in the form of economic spinoffs and taxes. He said Clark and her officials have not asked him to discuss the issues.

On the financial side, he said Enbridge, which also has gas-pipeline and distribution businesses, could exceed its goal of 10 percent growth in earnings per share over the next four years if it moves ahead with C$18 billion of secured projects and another C$12 billion that have a high likelihood of winning commercial backing. Another C$5 billion are seen as potential projects.

If projects in the first two categories went ahead, compounded annual growth rate in earnings per share could exceed 12 percent, Monaco said.

Enbridge shares were up 36 Canadian cents at C$39.33 on the Toronto Stock Exchange. They are up about 3 percent since the start of 2012, compared with a 3.6 percent increase in the S&P/TSX composite index.

Editing by Gerald E. McCormick, Janet Guttsman and; Peter Galloway

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