Enbridge in Rapid Seaway Expansion

Zacks Equity Research

Enbridge Inc. (ENB) — the parent company of Enbridge Energy Partners L.P. (EEP) —  plans to boost the capacity of its Seaway pipeline by the end of this year, much earlier than the previous forecast.

Seaway Crude Pipeline Company LLC is equally owned by the units of Enterprise Products Partners L.P. (EPD) and Enbridge. The pipeline companies recently completed their reversal operation of the line, enabling the flow of crude oil from Oklahoma storage hub to the Gulf Coast refining hub.

Currently, the pipeline has the capacity to transport 150,000 barrels of oil per day (:BPD), which was previously expected to exceed 400,000 BPD in the first quarter of 2013, upon further alternations as well as improved pumping capabilities. However, the pipeline companies are on track to expand the line by 250,000 BPD well before the scheduled time period.

Seaway pipeline is one of the pipeline projects that aimed at clearing a bottleneck at the pipeline hub. According to the U.S. Energy Information Administration (EIA), 45 million barrels of commercial crude oil was stored in the tanks at Cushing as of the week ended May 11. This represents a 12% increase from the year-earlier period. The recent boost in domestic oil production as well as lack of infrastructure to take it out of Cushing had pushed the U.S. benchmark oil prices approximately $20 below the European benchmark Brent.

The recent turnaround of the 500-mile, 30-inch diameter line facilitated North American crude oil producers in transporting more than 4 million BPD of oil to the U.S. Gulf Coast refineries. This Seaway system also includes a terminal and distribution network that originates from Texas City, Texas and serves local refineries and in the Houston region. It also includes dock facilities at Freeport and Texas City.

Again, Enbridge also remains concerned about rapid oil production from the Alberta oil sands and shale oil fields such as Bakken in North Dakota. Although the company expects the expansion of its North American pipeline network in 2014 to ease the glut, the recent boom in North American oil output could constrain the line as soon as 2016.

Enbridge Inc. — Canada's No. 2 pipeline company — remains engaged in the transportation and distribution of crude oil and natural gas primarily in Canada and the U.S.

Enbridge holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.

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