Enbridge Inc. CEO Greg Ebel said the company’s pipeline business has plenty of growth opportunities, with production from both the Permian Basin and western Canada poised to expand- in the coming years.
Permian production may increase by 2 million barrels per day, and Enbridge’s Ingleside export terminal is poised to benefit from those gains, Ebel said in an interview in Toronto this week.
Western Canadian production may increase by roughly 500,000 barrels this decade, and optimizations to the company’s Mainline system, as well as other projects, will help it capture that growth, he said.
“In the pipeline business, we tend to look 10, 15, 20 years out, and I think it’s going to take all those pipelines and then some,” Ebel said of western Canada. “I think it’s overblown, this idea that we have a bunch of pipes.”
The comments responded to concerns about weaker growth in Enbridge’s liquids unit, which accounted for nearly 60% of its adjusted earnings last year, that have weighed on the company’s stock and reduced the ‘analysts’ enthusiasm for the shares. Of the analysts who cover Enbridge, only 48% rate the stock a buy. This is down from 56% last year and 85% two years ago.
Enbridge has fallen 9.3% in the past 12 months, trailing the 4% drop in the S&P/TSX energy index but beating rival TC Energy Corp’s 25% drop.
The main obstacle to the expansion of both the liquids and natural gas businesses is the difficulty of obtaining permits for new pipelines, Ebel said.
“It’s hard for me to imagine a brand new pipeline being built very easily under current conditions in Canada and in some respects in the United States,” Ebel said. “The permit gets so long, has such uncertain deadlines, that clients generally don’t sign up.”
