Canadian midstream giant Enbridge is looking to the US Gulf coast to get even more Canadian crudes to the global market. Colin Gruending, president of liquids pipelines, talked to Argus about those plans and others on the sidelines of the Argus Americas Crude Summit in Houston, Texas. Edited for length and clarity.
Where is Enbridge on its partnership with Enterprise on the Sea Port Oil Terminal (SPOT) project near Freeport, Texas? Would Canadian crude go there?
We're still evaluating the opportunity with Enterprise. We're bullish on all commodities from North America ... wheat, coal, met coal, potash, NGLs, natural gas. Our thesis is that if the energy transition accelerates, those exports for oil are going to increase from people's base case assumptions.
SPOT is a pretty interesting, Houston-based export alternative, including for potentially Canadian crude to get off the continent through our pathway and the last leg. So there's still some industrial logic to all that.
We're in the market with the Enbridge Houston Oil Terminal (EHOT) now and 15mn bls is the ambition, but we'll likely phase it. There isn't really a vanilla, dedicated heavy oil terminal where Canadian crude can safely land. EHOT (being at the terminus of the 950,000 b/d Seaway Pipeline) could become a liquid, transparent pricing point for Canadian heavy in the Houston area. That's where we think the puck is going on finding better netbacks for Canadian producers.
Is reversing the 180,000 b/d Southern Lights condensate line and changing it into a crude export line in play?
It still has a pretty interesting and useful role to play in condensate, but it remains an option. It can remain an option for a number of years and we can revisit it another time. Right now we're in discussions with our shippers around condensate service. There's still lots of that needed in the basin.
What's next on the 540,000 b/d Line 5 pipeline in Wisconsin?
We are working cooperatively with the tribe [the Bad River Band] on some short-term mitigation factors within the reservation which we've been promoting and asking for many years. There is a mutual interest in dealing with the mitigation. We expect a decision (from the court) sometime in the first half of the year.
We're two and a half years into the permitting process with the Wisconsin Department of Natural Resources. We're trying to find the optimal route. (Commissioning of a rerouted line) is a couple years after we get the permits.
In Canada, Trans Mountain expects its 590,000 b/d expansion project (TMX) to be in-service by the end of this year, enabling oil sands producers to reach the Pacific. What impact will it have on Enbridge's 3mn b/d Mainline system?
We do expect some volume to come off the Mainline initially, maybe in the 5-10pc utilization range initially, but we'll see what that bidding dynamic does to that. We do have some downstream contracts that could create some stickiness. A pipeline that's 90pc utilized is still a very attractive situation for most.
And we see it refilling over time as measured growth re-emerges in the basin over time once we get policy sorted out and balance sheets strengthened, which they're well on their way to.
The Canadian barrel is attractive. It's cheap, it's always been cheap. It's been an attractive fuel and diet for anyone who can get it. We still see there being a very large pull from the traditional inland markets.
Any silver linings for Enbridge with TMX?
There's lot of operating leverage in our Athabasca regional network (in the oil sands region). There is space that is pre-built that isn't fully used or contracted. Should there be a drill-to-fill situation, that would be a tailwind for that part of our network, and our competitors.
You always want to have a little bit of extra egress out of any basin. Why? Think of it as insurance. In a world where permitting is really hard, the lead times on creating further insurance in this industry, those have changed. So optionality is important and lead time is important.
I think egress is a major decision factor when producers are considering further upstream investments and final investment decisions (FIDs) — and there will be some egress.
