Gateway takes back seat

Enbridge switches pipeline priority to U.S. - Canada's Gateway line takes back seat

SCOTT HAGGETT
Reuters News Agency
The Globe and Mail
November 2, 2006

CALGARY -- Enbridge Inc. will delay a planned pipeline running from Alberta to the Pacific in favour of expanding and accelerating new lines to U.S. markets, the Canadian pipeline company said yesterday as it announced its third-quarter profit rose 40 per cent.

Enbridge, Canada's No. 2 pipeline company, said it will hasten construction of its Alberta Clipper pipeline because of growing U.S. demand for heavy oil from the Alberta oil sands and slow development of its Gateway project, which would carry oil to a British Columbia tanker port on the Pacific Coast.

Alberta Clipper's first phase, running from near Edmonton, to Superior, Wis., will be boosted in size to 450,000 barrels a day from 400,000 at an additional cost of $140-million (U.S.), bringing the expected cost to $1.9-billion.

The line is expected to be completed by 2009.

It has speeded up plans to expand its Southern Access line, which takes Canadian oil to the Chicago area, adding 120,000 barrels a day of capacity by year-end, a boost needed to prevent rationing space, or apportionment, to its customers.

"This is particularly important in that November nominations on the system have almost put us into apportionment," Patrick Daniel, Enbridge's chief executive officer, said on a conference call.

The Southern Access line, which runs from Superior to Chicago, will carry a total of 400,000 barrels a day by 2009 and can be expanded.

Mr. Daniel said Enbridge had decided to focus on its U.S. lines after a series of announcements that refineries there would expand to accommodate more Canadian oil.

Those include a joint venture between EnCana Corp. and ConocoPhillips Co. that will expand two refineries to handle EnCana's oil sands production, and BP PLC's decision to spend $3-billion revamping its Whiting, Ind., refinery to handle more Canadian heavy oil.

"Those point to a desire on the part of our customers to accelerate the development of eastbound pipeline capacity," Mr. Daniel said.

The decision to expand in the U.S. means putting its $4-billion (Canadian) Gateway line on the back burner.

Gateway, designed to carry oil sands crude to a northern British Columbia deepwater port, where it would be shipped to Asia and the U.S. West Coast, won't start construction until at least 2009. "We are going to continue development efforts but not at the same accelerated pace as the Alberta Clipper project," he said.

The announcements came as the company said it made $95.5-million or 28 cents a share, up from $67.8-million or 20 cents.

Adjusted operating profit was $92.3-million, or 27 cents a share, up 25 per cent from $73.9-million or 22 cents.

Revenue rose 29 per cent to $2.2-billion from $1.7-billion, largely on higher commodity sales.

Enbridge maintained its forecast for the 2006 , of adjusted operating profit of $1.65 to $1.75 a share.

Enbridge

Q3 2006 2005 Profit (Loss) $95.5-million $67.8-million EPS 28¢ 20¢ Revenue $2.2-billion $1.7-billion

SOURCE: COMPANY REPORTS

as predicted in Fill'Er Up! back in September.