Enbridge sees increased crude volumes on Canadian Mainline in 2023

Enbridge is anticipating stepped-up throughput on its Canadian Mainline system in 2023 compared with the previous year, as incremental heavy oil barrels are produced in the Western Canadian Sedimentary Basin, CEO Greg Ebel said Feb. 10.

"Our Mainline is running full, and average throughput was 2.96 million b/d in 2022," Ebel said during the company's earnings call, adding, "In January and February, we will exceed that as we hustle to move every barrel we can from the basin."

The pipeline operator sees growth in the WCSB between now and 2030, and "as the basin grows, our system will fill back up," he said.

S&P Global Commodity Insights projects Canadian crude and condensate output to rise from 4.4 million b/d in 2022 to 4.9 million b/d in 2030.

The over 3,000-mile Mainline pipeline system ships Canadian heavy and light barrels from Edmonton to Gretna on the Canadian-US border, where the volumes flow onto Enbridge's Lakehead system that supplies crude oil to refineries in PADD II (Midwest) and further on to PADD III (USGC).

New tolling agreements

Besides providing additional capacity, the pipeline operator is also in talks with its shippers for new tolling agreements that includes two options: a new incentive rate-making deal; or a cost-of-service application, Ebel said without divulging details for commercial reasons.

"These discussions take time," he said, adding that Enbridge is factoring the impact of the planned startup of the Trans Mountain Pipeline Expansion, or TMX, that will provide shippers with an alternate egress out of the WCSB.

TMX is targeted to be in service in late 2023 and will offer shippers to move an additional 590,000 b/d of additional crude from the Edmonton hub through to Burnaby on the Canadian Pacific Coast in British Columbia.

"We expect the Mainline will remain well utilized once TMX is in service," he said. "We are talking to our shippers about the expansion, and its impact will be accounted for in the commercial tolling outcome."

Landlocked Western Canadian producers will seek opportunities to ship its crude to markets through both the Mainline and TMX to overcome the negative price differentials.

Western Canadian Select crude prices at Hardisty, Alberta, averaged at an $11.08/b discount to WCS at Nederland, Texas, in the fourth quarter, widening slightly from a $10.17/b discount in 4Q 2021, S&P Global Commodity Insights data shows.

However, that discount has since narrowed to $7.20/b as of Feb. 9 as a rise in Hardisty WCS prices has outpaced the rise in Nederland prices.

Higher USGC footprint

To further increase its footprint in the Permian Basin in southern Texas and "extend" its light oil strategy in 2022 the company increased acquired an additional 10% interest in the long-haul Gray Oak pipeline and increased Cactus II ownership to 30%, Ebel said.

Both the pipelines connect the Permian Basin to Enbridge's flagship Enbridge Ingleside Energy Center, or EIEC, at the Port of Corpus Christi in Texas, he said.

The 810-mile long-haul Gray Oak pipeline has a nameplate capacity of 1 million b/d, providing low-cost connectivity for Permian basin barrels to be shipped to Corpus Christi and Houston regions, while the Cactus II pipeline is a 670,000 b/d facility that extends from the Delaware basin in West Texas to Corpus Christi, with further connectivity to the Ingleside area.

EIEC is a major crude oil storage and terminal with access to a marine waterfront and hinterland pipeline connectivity to the Permian and Eagle Ford basins, making it a "cost-advantaged" location for storage and export of crude, Enbridge said in a statement.

At present, EIEC's crude storage facility is about 15.3 million barrels, it added.

"Beyond having the ability to move barrels on two pipelines [Gray Oak and Cactus II], we have an export terminal that provides our shippers with the capacity to access premium markets," Ebel said.

Bigger presence on Gulf Coast

With is marine export facilities at Ingleside, Ebel said, Enbridge is "moving the ball forward, and the future on the Canadian and US side [for producers] is through and out of the continent. We've got to be a bigger player on the US Gulf Coast."

Crude exports from EIEC terminal have risen in recent months.

According to Kpler vessel tracking software, crude exports from Enbridge's Ingleside totaled 25 million barrels in January, up from 21 million barrels in August 2022.

The Corpus Christi egress is becoming quite attractive and Enbridge is focused on building out its existing infrastructure, President of the Liquids Pipelines Colin Gruending said on the same call.

Enbridge's USGC strategy will initially be through acquisition where the "risk-adjusted returns are relatively attractive and provide synergies for integration along the value chain," Gruending said.

Low-carbon plants

In line with its low-carbon opportunities, Enbridge is developing a hydrogen/ammonia plant at EIEC, CEO Ebel said without giving details.

No comments were immediately available from Enbridge in Calgary.

In Alberta, the company is developing a carbon dioxide sequestration facility at Wabamum with a capacity of 4 million mt, Ebel said.