Enbridge Energy Partners L.P. (EEP) has recently announced its plans to make huge expansions in crude oil mainline pipeline system worth $3.2 billion. The project was proposed to transfer crude from western Canadato Eastern refineries as well as avoid obstacles in the U.S. Midwest.
The initiative would comprise additions of capacity to the company's Lakehead System and the Eastern Access Projects with its commissioning scheduled for 2014.
Per the Lakehead System expansion plan, capacity is expected to be enhanced on the Alberta Clipper pipeline by 27% to 570,000 barrels per day (bpd). Further extensions will be carried out in the Southern Access pipeline, which lies between the Superior Terminal and the Flanagan Terminal in Illinois, to 560,000 bpd from 400,000 bpd. These extensions are to be made on the existing pipelines without the need of any new construction. The mere addition of pumping horsepower and crude oil tanks at existing sites will suffice and cost about $360 million. The total costs for this initiative will be borne by the partnership.
Under the Eastern Access Projects, Enbridge Energy Partners plans to boost capacity in its Spearhead North pipeline, which links Flanagan, Illinois and the Terminal at Griffith, Indiana. The volumes will be increased to 235,000 bpd from 130,000 bpd and a new 330,000 barrel tank will be fixed at Griffith.
Together with the planned replacements in its 75-miles of Line 6B in Indiana and Michigan, the partnership intends to enhance its capacity to 500,000 bpd from 240,000 bpd. Subject to the customary regulatory approvals, parts of the 30-inch diameter pipeline will be substituted with 36-inch diameter pipe. Collectively, these expansions, including the formerly announced 50,000 bpd Line 5 Expansion are likely to cost about $2.2 billion. The projects under the Eastern Access expansion are to be financed by Enbridge Inc. (ENB) and Enbridge Energy Partners in the ratio of 60:40.
With the execution of these two large plans, the partnership will benefit from gaining access to new markets in North America for growing yield from western Canada and the Bakken.
Enbridge Energy Partners holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation.
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