CALGARY — Enbridge Inc. (TSX:ENB) said Wednesday it is planning a US$500-million expansion to its offshore pipeline network in the Gulf of Mexico, a region the Calgary-based pipeline firm sees as a major source of growth in the years ahead.
Under a letter of intent, Enbridge would build, own and operate the Walker Ridge Gathering system, which would gather natural gas from Chevron Corp.’s (NYSE:CVX) Jack, St. Malo and Big Foot developments in the Gulf.
“There have been a number of significant discoveries by major oil and gas companies such as Chevron in the ultra-deep water of the Gulf of Mexico, which are large enough to justify continued development, even in the current gas price environment,” Enbridge chief executive officer Pat Daniel told analysts on a conference call Wednesday.
Chevron (NYSE:CVX), based in California, is the second-largest U.S. oil and gas company after Exxon Mobil (NYSE:XOM).
Walker Ridge would bring new supplies into Enbridge’s existing Manta Ray and Nautilus offshore pipeline systems in the Gulf.
The project would have comparable risk and return characteristics to its normal business model, Enbridge said.
The new system is expected to include more than 300 kilometres of pipeline at depths of about two kilometres under the water and will have a capacity to carry 100 million cubic feet of gas per day.
Walker Ridge is targeted to come into service in 2014, said Stephen Letwin, executive vice-president of Enbridge’s gas transportation and international operations.
With the Chevron agreement announced, construction can begin in relatively short order, he added.
“We’re hopeful that we’re going to be able to get things rolling in a major way in 2010, 2011,” Letwin said.
In addition to Walker Ridge being a good investment in and of itself, it is also a platform for future growth, Daniel said.
“It will extend our infrastructure out into the ultra-deep part of the Gulf and put us in a very good position to serve some of the other new discoveries and also some of the oil opportunities,” he said.
Also Wednesday, Enbridge reported a drop in second-quarter profits, but said it is on track to meet the high end of its financial targets for 2009.
Earnings were $393 million, or $1.08 per share, down from $657.7 million, or $1.83 per share in the same 2008 period.
Stripped of one-time items, Enbridge would have earned $194 million, or 54 cents per share, up from $149.5 million, or 42 cents per share the year before.