Enbridge Inc. has begun discussions with customers about expanding its Main Line pipeline network to accommodate growing volumes of Canadian oil production, the Calgary-based company said Friday.

“We started commercial negotiations with the industry. “We engineered expansion throughout the quarter,” Colin Gruending, Enbridge’s president of liquids pipelines, said on a conference call with analysts.

Gruending added that the expansion could enter service as early as 2026 or 2027, although Enbridge does not yet have a cost estimate for the project. He emphasized that this would be a minor expansion that would add increased capacity across the existing pipeline network. It has been expanded many times throughout its 75-year history.

“This is not actually a reduction or a new way, but more of an optimization. Within the (existing) right-of-way…it is very feasible,” Gruending said.

Enbridge’s Mainline system is the largest pipeline system in North America, transporting crude oil from Western Canada to markets in Eastern Canada and the U.S. Midwest.

It wasn’t so long ago that industry observers believed the Main Line network would take a hit, as the Trans Mountain pipeline expansion opened and began offering Canadian oil companies access to new export markets off the West Coast.

However, this did not happen. Enbridge expects full-year average volume on its Mainline network to exceed three million barrels per day in 2024; That’s not much different from the 3.1 million barrels per day it achieved in 2023 before the start of the Trans Mountain expansion project.

And Canada’s oil production and exports continue to grow. Canadian crude oil production hit an all-time record of 5.1 million barrels per day in 2023 as companies ramp up in anticipation of the start of Trans Mountain expansion. Analysts have suggested the total could rise by as much as 500,000 barrels per day on average this year.

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Crude exports from Canada reached a record high of four million barrels per day in 2023 and continue to rise, according to Statistics Canada. Canadian crude oil exports to the United States reached a record high of 4.3 million barrels per day in July 2024, following the launch of the Trans Mountain project, according to figures released this week by the US Energy Information Administration.

The increase in production is so significant that Enbridge said the Mainline system was prorated in July and August and again in November. Distribution is an industry term that refers to what happens if demand for unconstrained space in a pipeline exceeds available capacity in any given month.

“I don’t know if I can see month-to-month apportionment going forward here, but seasonally, I think you’re going to see a lot of demand for the Main Line,” Gruending said.

Many analysts have suggested that Canada’s current oil boom could eventually revive the pipeline shortage problem. Before the Trans Mountain expansion project opened earlier this year, Canadian oil companies were suffering from a lack of pipeline export capacity; This meant that the price of Canadian heavy crude oil often traded at a significant discount to the US reference price.

Gruending said Enbridge is also looking at a number of potential expansion projects for smaller regional pipelines that serve Alberta’s oil and sands industry.

“It is very important economically that (the Western Canadian Sedimentary Basin) is not restricted,” he said.

Earlier this year, the Canadian Energy Regulator approved the new charging framework for Enbridge’s Mainline system. Tolls are fees oil companies pay to transport their product through a pipeline, and Enbridge had been negotiating a new pricing framework with its oil industry customers for a year and a half.

Tolls for the newly expanded Trans Mountain pipeline have not yet been finalized as oil companies resist higher costs that Trans Mountain Corp. wants to charge to cover cost overruns associated with the project’s construction.

On Friday, Enbridge reported third-quarter profits attributable to common shareholders rose to $1.29 billion, up from $532 million a year earlier.

The company said earnings per share rose to 59 cents per share in the quarter ended Sept. 30, from 26 cents per share in the same quarter last year.

Last quarter’s results included $112 million of non-cash, net unrealized derivative fair value gains; compared to a net unrealized loss of $782 million a year ago, which also required a provision adjustment of $124 million related to a litigation matter.

On an adjusted basis, Enbridge said it earned 55 cents per share in the latest quarter, down from 62 cents per share adjusted profit a year earlier.

Analysts’ average estimate was for earnings of 56 cents per share, according to LSEG Data & Analytics.

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