ENB Greenlights Expansion of Mainline and Flanagan South Pipelines

Enbridge Inc. ENB, a leading pipeline operator in North America, has approved a major expansion project, named the Mainline Optimization Phase 1 project, worth $1.4 billion to expand the capacity of the Mainline and Flanagan South pipelines. These pipeline networks are crucial in moving Canadian crude oil to the refineries in the United States. The expansion project will enable the Mainline network and Flanagan South pipelines to meet the increasing customer demand.

Capacity Expansion for Mainline and Flanagan South

The expansion project will add a cumulative pipeline capacity of 250,000 barrels per day (bbl/d) for Canadian oil producers, allowing them to transport more crude to the refinery network and export markets in the U.S. Midwest and Gulf Coast. ENB will add 150,000 bbl/d of additional capacity to the Mainline network through terminal upgrades and enhancements to the upstream systems. Further, the expansion project will boost the Flanagan South pipeline capacity by 100,000 bbl/d through the addition of pump stations along the network and increased terminal capacity. The expanded capacity is slated to come online by 2027.

Enbridge’s Mainline System, which transports crude oil from western Canada to the U.S. Midwest and eastern Canada, currently has a capacity of 3 million bbl/d. In the third quarter, the Mainline System shipped record volumes of 3.1 million bbl/d. The Mainline Optimization Phase 1 project is designed to expand egress capacity for Canadian oil shippers while maintaining a capital-efficient approach. This should improve system connectivity, ensuring more Canadian production can reach the refining markets across North America.

Potential Second Phase Under Evaluation

Enbridge is also considering a second expansion phase of the Mainline network, which could expand its capacity by up to 250,000 bbl/d. Per Reuters, the company is planning to formally assess the commercial interest in the second expansion phase next year. A company spokesperson mentioned that the expansion of its transportation networks to the United States makes sense for Enbridge, even as the Canadian government pursues diversification efforts to move away from the U.S. markets due to the volatility seen in the markets under President Trump. Almost 90% of Canadian crude oil is transported to the United States, and ENB noted that the U.S. markets continue to have significant demand for Canadian crude.

In the previous year, oil production in Canada reached record levels of 5.1 million bbl/d. Enbridge expects the production to grow by 500,000-600,000 bbl/d by the end of this decade. ENB’s planned expansion projects should enable it to meet the forecasted demand growth by the end of this decade.

ENB’s Zacks Rank and Key Picks

ENB currently carries a Zacks Rank #3 (Hold).

Some top-ranked stocks from the energy sector are Oceaneering International OII, Canadian Natural Resources Ltd. CNQ and FuelCell Energy FCEL. While Oceaneering and Canadian Natural Resources currently sport a Zacks Rank #1 (Strong Buy) each, FuelCell carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oceaneering International delivers integrated technology solutions across all stages of the offshore oilfield lifecycle. The company is a leading provider of offshore equipment and technology solutions to the energy industry. OII’s proven ability to deliver innovative, integrated solutions supports ongoing client retention and new business opportunities, ensuring steady revenue growth.

Canadian Natural Resources is one of the largest independent energy companies in Canada engaged in the exploration, development and production of oil and natural gas. The company boasts a diversified portfolio of crude oil, natural gas, bitumen and synthetic crude oil. It has delivered 25 consecutive years of dividend increases, one of the longest streaks among global oil producers.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

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This article originally published on Zacks Investment Research (zacks.com).

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