Enbridge (NYSE:ENB) and its affiliates are engaged in an aggressive expansion of the company's pipeline system in the United States and Canada to take advantage of the rapid development of the Bakken formation by the exploration and production industry. (To learn more about oil and gas, read Oil And Gas Industry Primer.)
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In August 2010, Enbridge Energy Partners L.P. (NYSE:EEP) and Enbridge Income Fund Holdings (TSX:ENF) announced a $550 million expansion designed to add 145,000 barrels per day to the company's existing capacity of 185,000 barrels per day.
The first part of this expansion involved the reactivation and reversal of an existing pipeline system that runs from Canada into the United States. The pipeline is approximately 85 miles in length and has been reconfigured to carry crude oil from Berthold, North Dakota to Saskatchewan. This part of the expansion was completed in May 2011 and added a capacity of 25,000 barrels of oil per day.
The next phase of the expansion will add 120,000 barrels of oil per day of capacity, and involve new and upgraded pipelines and associated equipment throughout the Enbridge system on both sides of the border.
The expansion in the United States is being done by Enbridge Energy Partners L.P., and the Canadian work by Enbridge Income Fund Holdings. Enbridge is the parent company of both these entities and owns a 27% interest in Enbridge Income Fund Holdings and a 26% interest in Enbridge Energy Partners L.P.
When this expansion is completed and in service by early 2013, crude oil will be transported from North Dakota to Manitoba, where it will enter the main Enbridge pipeline for transport to the lower 48 states. These expansions will increase the total capacity of the Enbridge system servicing the Bakken to 330,000 barrels of oil per day. The company has configured this expansion so that an additional 180,000 barrels of oil per day of capacity can be added at low cost.
Other companies are also planning new pipelines to handle Bakken production. Plains All American Pipeline, L.P (NYSE:PAA) is proposing to build the Bakken North Pipeline, which would run approximately 100 miles and carry crude oil from North Dakota to storage facilities in Saskatchewan.
Enbridge is also competing with the railroad industry, which is currently helping to transport oil out of the area to end markets. EOG Resources (NYSE:EOG) and NuStar Energy L.P. (NYSE:NS) recently announced that they would jointly build a 70,000 barrel per day offloading facility in Louisiana to accommodate production from the Bakken and elsewhere.
The Bottom Line
Investors that want to participate in opportunities in the energy sector have many choices and may want to consider pipeline companies that don't have direct exposure to volatile commodity prices. (To learn about investing in oil, check out Oil: A Big Investment With Big Tax Breaks.)
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