Enbridge Scraps Plan to Build Sandpiper Amid Bakken Slump

  • Company sees no need for more capacity in region for 5 years
  • Funding plan through 2019 doesn’t require more capital

Enbridge Inc. said it has withdrawn a regulatory application for its $2 billion Sandpiper pipeline amid a slump in production in the Bakken.

New pipeline capacity won’t be needed for another five years in North Dakota, the center of Bakken production, the Calgary-based company said in a statement Thursday. The company also reached an agreement on funding the acquisition of the separate Bakken Pipeline system.

Sandpiper had been delayed by regulatory hurdles in Minnesota, the company said earlier this year. Sandpiper would carry crude 616 miles (991 kilometers) from western North Dakota through Minnesota to northwestern Wisconsin.

“It was pretty obvious that Sandpiper wasn’t going to go ahead,” said Patrick Kenny, an analyst at National Bank Financial in Calgary. “Overall, it’s a positive move by Enbridge.”

A two-year slump in crude prices has curtailed production expansion across North America, hurting some pipeline operators’ plans to build lines to service growing output. Enbridge has said it’s looking for ways to diversify away from oil transportation.

Funding Plan

Enbridge also said its funding plan through 2019 doesn’t require any additional capital. The company said it will fund the Bakken purchase jointly with its Enbridge Energy Partners LP affiliate and has already raised the money it needs to make the purchase.

Enbridge and Marathon Petroleum Corp. announced on Aug. 2 that they agreed to pay $2 billion for a minority stake in the Bakken Pipeline system, securing a way to transport crude from North Dakota to the eastern Gulf Coast sooner than planned. Enbridge said at the time it will pay $1.5 billion for its 27.6 percent share of the network, while Marathon will put up $500 million for its 9.2 percent.

“In light of the deferral of Sandpiper, our investment in the Bakken Pipeline will accelerate cash flow generation from our Bakken assets and help alleviate the funding drag associated with a large greenfield project,” Chief Executive Officer Al Monaco said in the statement.

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