Enbridge has postponed the second phase of its Mainline crude pipeline expansion, a project that would have added 250,000 barrels per day of capacity, the company said on Friday. Canadian oil producers have not committed to significant output increases, and that shortfall in producer commitments is part of why Enbridge is holding the project back.
The Mainline network is already Canada's largest crude oil export pipeline system, moving 3 million barrels per day of crude from Western Canada into Eastern Canada and the U.S. Midwest. The postponed second phase would have added export capacity for Canadian crude moving into U.S. refineries.
Smaller projects first
Enbridge CEO Greg Ebel said the company will focus first on two smaller projects: the 100,000 bpd Flanagan South Expansion and the 50,000 bpd Southern Access Extension. Enbridge will also add capacity to two secondary pipelines that connect to the Mainline in Illinois and carry crude to multiple U.S. refining centers and the Gulf Coast. The company is soliciting contracted volumes for those two pipelines through commercial open season processes.
Enbridge has already committed to a first-phase Mainline expansion that would add 150,000 bpd of capacity and enter service by 2027. The company had previously projected the second phase could enter service as early as 2028.
Producers wait on policy certainty
Company leadership said producers are unlikely to make binding commitments to new pipeline capacity until proposed government policy changes and regulatory rollbacks become law. Colin Gruending, Enbridge's president of liquids pipelines, said the company does not expect Canadian oil sands companies to meaningfully raise production until there is more policy and regulatory certainty. Nor, he said, does Enbridge expect producers to make what he called "binding FID-able commitments to new pipelines" until then, using the industry term for final investment decisions.
Ebel said federal government policy changes over the past year and the rollback of some environmental rules give Canada a chance to expand its oil output. He also said agreements between the federal government and Alberta aimed at speeding oil sands growth could have a major impact, but that most of the proposed changes remain non-binding and are not yet law. Ebel said Enbridge may have moved too quickly in proposing the Mainline phase two project, but that the company is confident the project will eventually be needed.
Output at a record high
Canadian oil production is growing and hit a record average of 5.1 million bpd last year. That growth has spurred multiple proposals for new export pipelines, including projects from South Bow and Bridger Pipeline to revive parts of the former Keystone XL system.
Earlier this month, Alberta and the federal government announced plans for a potential 1 million bpd oil pipeline to Canada's British Columbia coast, but no decision has been made to proceed with either that project or the South Bow-Bridger proposal.
