Enbridge Advances Expansion of Permian’s Gray Oak Pipeline

Canadian midstream company Enbridge Inc., after concluding open seasons on its Flanagan South, Southern Lights and Algonquin gas pipelines in 2023, is preparing for a Gulf Coast expansion of Gray Oak before the end of March. The Texas pipeline provides connectivity from the Permian Basin to Corpus Christi and the Houston area.

In its Feb. 9 earnings call, Enbridge put the spotlight on its Mainline pipeline system, Canada’s largest crude oil transportation system, pointing out record throughputs of an average 3.1 MMbbl/d annually, anchored by December’s exit rate of 3.26 MMbbl/d.

In December, the company filed the Mainline Tolling Settlement (MTS) with the Canada Energy Regulator, with expected approvals in the coming months, according to President and CEO Gregory Ebel. The MTS covers both Canadian and U.S. shippers of oil and liquids on Mainline, which continues to operate as a common carrier system. The agreement includes support for Line 5 capex, the company said.

“Our customers will receive the competitive and responsive service they're accustomed to,” Ebel said. “Enbridge will earn attractive risk adjusted returns, and the Mainline will continue to feed North American and global markets with a long-term source of safe, secure and affordable energy.”

Open seasons

Enbridge is planning to initiate an open season on Gray Oak pipeline, advancing its U.S. Gulf Coast oil strategy. The company plans a phased expansion of up to 200,000 bbl/d on Gray Oak with an open season planned for first-quarter 2024.

“Enbridge’s U.S. Gulf Coast infrastructure provides customers with the most cost-effective path from the Permian to tidewater, and we are well positioned to take advantage of growing Permian production,” Ebel said.

During fourth-quarter 2023, the company initiated and closed an over-subscribed open season on Southern Lights Canada Pipeline (SLCP) for 165,000 bbl/d of existing capacity available July 1, 2025.

Southern Lights Pipeline, which comprises both SLCP and Southern Lights U.S. Pipeline, is a 2,556 km pipeline originating at the Enbridge Manhattan Terminal in Illinois and terminating in Edmonton, Alberta.

Enbridge also concluded an upsized open season of its 110,000 bbl/d Flanagan South Pipeline, securing full path transportation from Western Canada to the U.S. Gulf Coast and “ensuring the Mainline remains well utilized,” Ebel stated.

According to Enbridge, Flanagan is now 90% term-contracted on its 720,000 bbl/d capacity.

In the Northeast, Enbridge also concluded an open season on the Algonquin pipeline system delivering additional gas to New England, noting that they are “pleased with the results and are currently evaluating potential options to satisfy our customer’s needs,” Ebel said.

Algonquin transports 3.09 Bcf/d of natural gas through 1,131 miles of pipeline in New England, New York and New Jersey, according to the company.

Acquisitions, transmissions

On Sept. 5, 2023, Enbridge entered into three separate definitive agreements with Dominion Energy to acquire the East Ohio Gas Co., Questar Gas Co. and Public Service Co. of North Carolina for $14 billion. These acquisitions are expected to close in 2024.

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Enbridge executives were confident they had the necessary capital to close the deal.

“As you know, we brought in much of the financing. So you know, somebody came along tomorrow and said, you can close this utility or that one, we're ready to go. So I think that creates a ton of flexibility,” Ebel said.

Enbridge continues to progress on LNG transmission projects to export facilities on the U.S. Gulf Coast. The company expects the Rio Bravo pipeline and Venice Extension pipelines to be placed into service later this year.

The Rio Bravo is designed to transport up to 4.5 Bcf/d from the Agua Dulce supply area to NextDecade's Rio Grande LNG project in Brownsville, Texas.

The Venice Extension provides 1.26 Bcf/d of firm natural gas transportation supply to the Venture Global Plaquemines LNG facility in Plaquemines Parish, Louisiana.

On the M&A front, Enbridge closed two gas storage acquisitions in 2023: Aitken Creek, with 77 Bcf working capacity facility in British Columbia and Tres Palacios, which added 35 Bcf of working gas capacity in the U.S. Gulf Coast.

“Our pro-forma gas distribution business will deliver approximately 9.3 Bcf/d of natural gas to 7 million customers, making it North America's largest natural gas utility platform,” Ebel said.