Oct 22 Enbridge Inc, Canada's
second-largest pipeline company, said it will buy some gas
facilities from Encana Corp in the Peace River Arch
region in northwestern Alberta to strengthen its natural gas
gathering and compression business.
Enbridge, whose pipelines carry the bulk of Canada's oil
exports to the United States, said its total investment in the
region is expected to be about C$264 million ($266 million)
after construction of all the facilities is completed in 2013.
Enbridge has been looking to strengthen its Canadian gas
gathering and compression business, while Encana, Canada's
biggest gas producer, has been shifting to more profitable oil
and liquids-rich gas production. Dry gas prices are under
pressure due to an oversupply of the fuel in North America.
"This agreement in the Peace River Arch region represents
another step in the execution of our strategy to establish a
strong position in the Canadian midstream business," said Leon
Zupan, president of Enbridge's gas pipelines unit.
Enbridge faced fresh political opposition to its C$6 billion
Northern Gateway pipeline on Monday, when British Columbia
Premier Christy Clark was reported as saying that any move by
the federal government to push through the controversial project
would lead to national political crisis.
The Northern Gateway is a proposed 525,000 barrel-a-day line
that would transport crude from Alberta's oil sands to Kitimat
on British Columbia's Northwest coast for shipment to Asia.
Enbridge shares fell more than 1 percent to C$39.05 on the
Toronto Stock Exchange, while Encana shares fell 5 percent to
C$22.56 as Canada's rejection of a foreign bid for Progress
Energy Resources Corp rippled through energy stocks.
DEFERMENT A BOON
Enbridge said on Monday it would defer the commissioning of
Phase 1 and the construction of Phase 2 of the Cabin gas plant
in British Columbia's Horn River Basin, a gas-rich shale
formation where Encana is one of the dominant producers.
The company, interested in liquefied natural gas projects
being developed in British Columbia, owns a 71 percent stake in
the Cabin gas plant, including the 57.6 percent interest it
bought from Encana.
Analysts said the deferment is actually good news for
Enbridge as it will begin receiving fees for investments made in
the Cabin gas plant, starting December.
"They will defer the commercialization of Phase 1. So they
may not be starting facilities but are going to receive their
fees as they would originally," said analyst Juan Plessis of
Phase 1 was expected to be in-service in the third quarter
of this year, while phase 2 was expected to be ready in the
third quarter of 2014.
"What is happening now is ... they are going to stop
construction of Phase 2 right now, but they will be able to
receive fees on not only on Cabin Gas 1 but also on the capital
they spend on Cabin Gas 2," Plessis said.
"(The deferment) is probably a penny or two accretive to EPS
to Enbridge in 2013 and a penny or two accretive in 2014."
Analyst David McColl of Morningstar said the deferment is
probably due to weak natural gas prices.
"When we look at the North American market for natural gas,
the economics just aren't pushing for the rapid development of
Cabin," he said.