Enbridge To Expand In Oil Sands, Join CO2 Project
Author: Scott Haggett
Enbridge Inc said on Monday it plans a C$400 million ($384 million) expansion of its Waupisoo oil sands pipeline system and is joining a carbon-capture project backed by power producers TransAlta Inc and Capital Power Corp.
Enbridge, Canada's No. 2 pipeline company, said producers have committed to ship another 229,000 barrels a day on Enbridge's Waupisoo system, requiring an 255,000 bpd expansion of the line, which currently handles up to 350,000 barrels of oil sands crude daily.
Oil companies are again expanding operations in the oil sands region of northern Alberta, the largest oil reserve outside of the Middle East, after investment in the region dried up as commodity prices stagnated during the recession. Suncor Energy Inc, Total SA, Imperial Oil Ltd and others are expanding existing operations or launching new projects as oil prices firm.
The expansion of the Waupisoo system, which gathers oil from projects and delivers it to a pipeline hub near Edmonton, Alberta, 380 kilometers (236 miles) south, will be done in two phases. The first 65,000 bpd tranche will be complete in the second half of 2012, then a 229,000 bpd expansion will be added in the second half of 2013.
The expansion cements Enbridge's position as the largest pipeline operator in the oil sands region, gathering the oil to ship on its larger lines to the United States and Canada and making the company a likely choice for new producers in the region.
"We expect (Enbridge) to continue leveraging its dominant position in the regional oil sands shipping into further contract wins," Chad Friess, an analyst at UBS Canada, wrote in a note to clients.
Enbridge said increasing the size of the Waupisoo line will start adding to the company's profits in three years.
"The Waupisoo expansion program will begin to contribute to our growth in earnings per share by 2013, and increasingly thereafter as the volumes increase to the full commitment levels," Pat Daniel, Enbridge's chief executive, said in a statement.
The additional commitment includes 30,000 bpd from Statoil's new Leismer project, which was announced in February.
Enbridge also said on Monday it will join TransAlta and Capital Power in Project Pioneer, a C$1.4 billion scheme to trap carbon dioxide emissions from the Keephills 3 coal-fired generation plant west of Edmonton.
The project has C$779 million in backing from the Alberta and Canadian governments. It aims to cut emissions of greenhouse gases by 1 million metric tons a year.
Enbridge said it would bring its knowledge of pipeline design and construction expertise to the project, as well as its research into sequestration of the gas, but did not detail how much it would invest.
The partnership's plan involves using chilled ammonia capture technology, developed by France's Alstom SA, to strip out carbon dioxide produced by the power plant. The gas, which is blamed for global warming, would then be piped to old oil fields to boost production as well as stored in saline aquifers deep underground.
Enbridge shares were up 60 Canadian cents at C$49.66 on Monday afternoon on the Toronto Stock Exchange.
(Editing by Peter Galloway)