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Enbridge Projects More Growth in North American Gas Businesses

Calgary-based Enbridge Inc. last week reported the "best" quarterly results in company history, but the company doesn't plan to rest on its laurels. Future growth, said CEO Patrick Daniel, will be more balanced between liquids pipeline projects and increasing opportunities in natural gas and renewable energy.

"We expect natural gas and green energy, in combination, to contribute growth in Enbridge earnings similar to our liquids pipelines business," Daniel said during a conference call Wednesday to discuss quarterly and year-end 2009 earnings.

Enbridge's 4Q2009 adjusted earnings, which remove the effects of one-time items, were C$239 million, an 18% increase over C$202 million in the prior-year period. Enbridge carries the bulk of Canada's oil to U.S. markets, and the liquids pipelines accounted for most of the quarterly gains with adjusted earnings of C$141 million compared with C$106 million in the year-ago period.

The future continues to look bright for the liquids business, with projected earnings of 10%-plus in the medium term, but Daniel was quick to note the big plans for Enbridge's natural gas and renewables businesses.

"In natural gas, growth opportunities have never been better," Daniel told financial analysts. "In 2009 Enbridge Offshore Pipelines secured two ultra-deepwater developments in the Gulf of Mexico: the $500 million Walker Ridge Gas Gathering System and the $250 million Big Foot Oil Pipeline. Both of these utilize a new commercial model for operating in the Gulf, which aligns our risks with our onshore infrastructure business model." The Walker Ridge system would process gas from the deepwater Jack, St. Malo and Big Foot fields, which are operated by Chevron Corp.

"We currently transport approximately 40% of all gas in the Gulf of Mexico and 50% of deepwater gas production, and we're exceptionally well positioned to capture further gas pipeline opportunities as well as related oil pipeline opportunities," Daniel said.

Onshore gas assets also are positioned to take advantage of the shale gas plays in both Canada and the United States, Daniel said. Enbridge currently has gas pipeline systems or projects under way in the Granite Wash gas play in the Texas Panhandle, in the Barnett Shale, in East Texas' Bossier Sands and in the Haynesville Shale, where the proposed LaCrosse Pipeline would carry gas from Carthage, TX, to southeastern Louisiana (see NGI, Nov. 16, 2009).

Alliance Pipeline Inc., jointly owned by Enbridge and Fort Chicago Energy Partners LP, is fully contracted until 2015, Daniel said. It's designed to carry "liquids-rich gas produced from the Montney and Bakken [shales] with a direct link to the Aux Sable fractionation plant."

In the Bakken Shale, there "very definitely is going to be a need for rich gas capacity, and beautifully, Alliance runs right through the Bakken play...I'll leave it at that because we are working on some opportunities right now." The Alliance system could be expanded, he noted, and "I'm pretty confident it will be the next logical step..."

More opportunities also exist to carry gas from Canada's Montney and Horn River shale plays, Daniel noted. Montney gas is wet, which means it would likely move on an expanded Alliance system with connections to the Aux Sable system, which may be more efficient than moving the gas to Kitimat's liquefied natural gas facility. Horn River's gas output is dry, and that could move on a western system.

"I don't think I've ever been as confident of the North American growth opportunities in front of Enbridge in large part because of the diversity. The Bakken is under way, we've got a gas pipeline in Montney and opportunities for Alliance and Vector. There are shale play opportunities and the offshore has come alive in a big way for us. The gas distribution business and incentive tolling also look very bright."

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