Enbridge to Invest $700 Million in New Gulf of Mexico Oil and Gas Pipelines

Enbridge to Invest $700 Million in New Gulf of Mexico Oil and Gas Pipelines
Published on: Oct 3, 2024

Enbridge Inc.(TSX: ENB), a pipeline company headquartered in Calgary, Canada, announced on Thursday that it will invest approximately $700 million to construct new crude oil and natural gas pipelines in the U.S. Gulf of Mexico. This investment is associated with the recently approved Kaskida development project, operated by BP Exploration & Production.

BP discovered the Kaskida oil field in 2006, which holds an estimated 275 million barrels of recoverable oil equivalent. Gordon Birrell, Executive Vice President of Production and Operations at BP, stated the company’s intent to develop Kaskida into a world-class project, tapping into the Gulf of Mexico’s oil and gas potential. The project is expected to commence production in 2029, with an initial phase daily capacity of 80,000 barrels of oil.

The Canyon Oil Pipeline System will have a processing capacity of 200,000 barrels per day, starting from the Keathley Canyon area of the Gulf. The oil will be transported to the existing Green Canyon 19 offshore platform, operated by Shell Pipeline, and subsequently delivered to Louisiana for further distribution and refining.

Additionally, the natural gas pipeline, named the Canyon Gathering System, will have a capacity of 125 million cubic feet per day and will connect to Enbridge’s existing Magnolia Gas Gathering Pipeline. This aligns with Enbridge’s future expansion plans as the Kaskida project will significantly enhance their natural gas operations.

Allen Capps, Senior Vice President and Chief Commercial Officer for Gas Transmission and Midstream at Enbridge, highlighted the company’s positive outlook on natural gas. Enbridge has recently been active in this area with acquisitions like East Ohio Gas and Quest Star, balancing its business between liquid fuels and natural gas. The anticipated rise of AI and data centers is expected to drive significant electricity demand, enhancing the outlook for natural gas due to its role in power generation.

Enbridge has been heavily investing in the Gulf Coast of the U.S. to meet the growing global demand for energy. It supplies natural gas to five LNG export terminals there and owns North America’s largest crude export terminal, Ingleside Energy Center, near Corpus Christi, Texas.

Regarding Enbridge’s stock, analysts have given it a “Moderate Buy” consensus rating in the last three months, based on four “Buy” ratings, four “Hold,” and one “Sell.” Despite a 37.38% increase in share price over the past year, the average price target of C$55.63 suggests a modest 1.08% upside potential. However, the announcement of new pipeline developments caused a slight decrease in Enbridge’s stock price on Thursday.

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