Canada's Enbridge solicits bids for Mainline oil pipeline amid space crunch

(Reuters) - Canadian pipeline company Enbridge Inc ENB.TO said on Friday it would invite bids for contracted space on its Mainline system, as shippers compete to move oil on the country's congested pipeline networks.

FILE PHOTO: The Enbridge Tower is pictured on Jasper Avenue in Edmonton, Alberta, Canada on August 4, 2012. REUTERS/Dan Riedlhuber/File Photo

Currently, shippers nominate barrels on a monthly basis, but Enbridge proposes to switch to a system in which shippers sign long-term fixed volume contracts. The change comes as shippers have complained that the current system is inefficient and as Enbridge seeks to secure volumes ahead of rival projects in the works.

The Mainline ships 2.85 million barrels per day of crude from the Canadian province of Alberta to the United States, making it Canada’s biggest oil pipeline network. Pipeline space to move Canada’s crude has not kept with growing output, as courts or regulators have stalled Enbridge’s Line 3 replacement and other projects.

“Our new contract offering responds directly to what customers are asking for,” Enbridge Chief Executive Al Monaco said on a quarterly conference call.

He said the company took nine months to hear shippers’ concerns and refine terms, resulting in balanced access for all types of customers.

Some shippers are, however, concerned that smaller Canadian producers will be elbowed out by refiners like BP Plc BP.L in the U.S. Midwest as they snap up the bulk of space.

“Effectively foreign entities will (potentially) own the largest transportation corridor in Canada. That spells disaster for Canadian producers,” one Calgary-based trading source said.

Open season began on Friday and runs through Oct. 2. Enbridge said it would sign contracts of eight to 20 years with shippers on 90% of the network, leaving the remainder for spot sales.

The contracts take effect in mid-2021, pending regulatory approval.

The company lowered its volume requirements last month to satisfy smaller producers, Reuters reported.

Enbridge shares rose 1.2% in Toronto.

Separately, the company reported adjusted earnings that rose to C$1.35 billion ($1.02 billion), or 67 Canadian cents per share, in the second quarter, from C$1.09 billion, or 65 Canadian cents per share, a year earlier.

Analysts on average were expecting 59 Canadian cents per share, according to IBES data from Refinitiv.

The company transported 2.66 million barrels per day through the Mainline, up from 2.64 million barrels per day a year earlier.

It also said its natural gas line in Moreland, Kentucky, that exploded, killing one person and igniting homes, will not return to service until it is “absolutely safe.”

Reporting by Debroop Roy in Bengaluru and Rod Nickel in Winnipeg; additional reporting by Nia Williams in Calgary; Editing by Arun Koyyur and Steve Orlofsky