Enbridge to expand line as Bakken demand rises

.

C ontinued increases in production from light oil plays in North Dakota and Saskatchewan have prompted Enbridge to announce a new expansion program for its Bakken pipeline system.

The $543-million project will include a series of expansions that will boost volume on the line by 145,000 barrels per day to 325,000 bpd, Calgary-based Enbridge Inc. said Tuesday.

Enbridge affiliate Enbridge Income Trust will shoulder $190 million for the Canadian portions of the expansion, while troubled Enbridge Energy Partners will take on approximately $370 million US for expansions south of the border.

Enbridge Energy Partners has been grappling with the fallout from a July oil spill into Michigan waterways that will cost the Houston-based affii-ate up to $400 million US in cleanup eff orts, before insurance and excluding fines.

The latest plan for the Bakken pipeline, which runs through Montana, North Dakota, Saskatchewan to Manitoba, will double flow from prolific oil plays that have become increasingly economic to access through different drilling technologies.

"We are confident that this series of expansions will relieve much of the current demand for pipeline capacity out of the Bakken and Three Forks production areas, as well as provide the foundation for timely future expansions to meet the needs of the region," said Steve Wuori, vice-president of liquids pipelines, in a statement.

The company said it had received long-term shipping commitments from anchor shippers to go ahead with the expansion, pending approval by regulators, but will be holding a binding open season for new shippers "eminently."

Enbridge holds 72 per cent of the income fund and 27 per cent of Enbridge Energy Partners.

Tuesday's announcement comes over and above a recent 51,000 bpd expansion on its North Dakota system to Clearbrook, Minn., that brought capacity on the line to 161,500 bpd.

In Canada, Enbridge Income Trust started three expansions on its Saskatchewan system that will up capacity by 125,000 bpd late this year, and bring capacity into Cromer, Man., to 230,000 bpd.

"The suite of projects we're proposing will provide firm access from North Dakota oilfi elds to the Enbridge Mainline system at Cromer," said spokeswoman Gina Jordan.

The main line has been running below capacity for several years, making the proposed Bakken expansion a smart move, said Bob Hastings, with Canaccord Adams.

"There's lots of surplus capacity out of Canada and anything that utilizes that main line capacity is a good thing," Hastings said.

Increasing volumes could soften the burden of tolls for shippers on the line, but not enough to mollify shippers such as Suncor Energy and Imperial Oil, he noted.

The two producers have launched actions protesting toll increases with Canadian and U.S. regulators, and will be presenting arguments to the National Energy Board at public hearings in November.

Canadian pipeline expansions that came to service just as the recession hit and demand dropped have resulted in just under one million barrels per day of excess capacity into the U.S.

Tolls have risen to cover fixed costs against lower volumes, benefiting pipeline investments, but taking a bite out of shippers' profits.

domeara@theherald.canwest.com