Enbridge (ENB) is expanding its portfolio in a slew of pipeline announcements involving South Texas.
Enbridge reached final investment decision (FID) on a 120,000-bbl/d expansion of the Gray Oak Pipeline, the company said during its Aug. 2 second-quarter earnings report. Enbridge, operator of Gray Oak, said the line expansion is expected to be completed in 2026,
Gray Oak Pipeline is an 850-mile crude system connecting the Permian Basin to South Texas. Enbridge's Ingleside Energy Center, located in the region, is the largest crude oil storage and export terminal by volume in the U.S.
According to Jeffries Equity Research, the expansion is expected to be completed with minimal capital.
The Gray Oak Pipeline is a joint venture (JV) between Enbridge, Phillips 66, Marathon Petroleum and Diamondback Energy. The FID follows an open season for the pipeline that ended on June 28.
“The incremental volumes will serve growing demand at our Ingleside facility, and we expect the expansion to be capital-efficient with an EBITDA multiple below 5X,” said Greg Ebel, Enbridge president and CEO.
Enbridge has 18 MMbbl of storage at Ingleside and is building space for an additional 2.5 MMbbl, expected to be available by 2025.
The Gray Oak expansion FID was the second pipeline announcement involving Enbridge in three days. On July 31, a Whitewater Midstream-led JV involving Enbridge, Targa Resources and MPLX made FID for the Blackcomb Pipeline, which will carry natural gas from the Permian Basin to South Texas with a capacity of 2.5 Bcf/d.
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Also in South Texas, the company reported an FID on a $250 million solar project near Corpus Christi. Orange Grove Solar is a 130-megawatt project expected to be in service in 2025, and is funded by a purchase agreement with AT&T.
On its existing pipeline network, Enbridge received approval from the Federal Energy Regulatory Commission for a 6% rate increase on the Texas Eastern Pipeline effective October 2024 and a 2.75% increase in January 2026. The Texas Eastern delivers natural gas from the Gulf Coast to much of the Southern U.S. and as far north as New York.
“This reflects our continued focus on optimizing our return assets to ensure we are earning a reasonable return while delivering safe and reliable energy for customers,” Ebel said.
The company also hit a second-quarter flow record of 3.1 MMbbl/d on its Mainline, which delivers crude from Canada to the U.S. Enbridge hit the record even though the Trans Mountain Pipeline (TMX), which delivers Canadian crude to the country’s West Coast, began operations in May.
“Despite TMX entering service during the quarter, ENB’s Mainline system was still in apportionment, minimizing volume displacement to the Canadian West Coast and keeping the pipeline full,” wrote TPH&Co.’s A.J. O’Donnell in an analysis of the company’s earnings.
Led by its liquids sector, Enbridge reported an EBITDA of CA$4.3 billion (US$3.1 billion) for the quarter, slightly above the consensus estimate of CA$4.2 billion (US$3 billion), according to O’Donnell. However, overall earnings were 5% below expectations, causing many analysts to label the quarter as neutral.