Canadian Pipeline Giants Enbridge, TransCanada Differ Greatly in Project Strategies

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Researched by Industrial Info Resources (Sugar Land, Texas)--TransCanada Corporation (NYSE:TRP) (Calgary, Canada) and Enbridge Incorporated (NYSE:ENB) (Calgary, Canada) are both Canadian pipeline companies worth billions. However, their building strategies are complete opposites.

TransCanada's 500,000-barrel-per-day (BBL/d) Keystone XL pipeline has made international headlines, has been a huge target of demonstrations and protest over the past several years, and is expected to cost about $7 billion to complete.

In contrast, Enbridge is working to transport an even larger amount of crude oil from Alberta's oil sands across the U.S.-Canadian border, but it has not garnered nearly as much attention, nor public ire. Rather than build a new pipeline and all its associated facilities, Enbridge has instead elected to expand its existing infrastructure, specifically lines 61 and 67, by increasing pump capacity on existing sites. In essence, TransCanada is building a fewer number of much higher-profile and higher-cost projects, while Enbridge is building a higher number of lower-profile and lower-cost projects.

Another key illustration of the difference between Enbridge and TransCanada can be found in how they are approaching the shipment of crude oil from the Alberta oil sands to eastern Canada. TransCanada has proposed the Energy East project. While it would use a large amount of existing pipeline, it still entails the construction of hundreds of miles of new pipe across multiple provinces in Canada, to say nothing of 72 planned pump stations and laterals. In contrast, Enbridge is using multiple existing pipelines and reversing and expanding its Line 9B to reach refiners in Quebec.

Energy East is expected to cost roughly $12 billion. The Line 9B reversal and expansion project clocks in at just more than $150 million to transport about one-third of Energy East's 1.1 million barrels per day. Another difference between the approaches, but similar to the Keystone XL project, is that Energy East has faced heavy opposition from grassroots movements.

In total, according to Industrial Info, Enbridge has 159 capital projects worth $23 billion currently being developed, while TransCanada is developing 163 capital projects for $28 billion.

Breaking down these numbers further, the trend of TransCanada investing in fewer, more expensive projects and Enbridge investing in more, less expensive projects becomes readily visible. Of Enbridge's 159 projects, 105 are expansions, unit additions, or other non-grassroot projects, representing $9 billion of the $23 billion in planned spending. In contrast, TransCanada has only 11 non-grassroot projects, which are expected to cost $5 billion. Not only does this show that TransCanada is spending more on fewer projects, but it is spending more on building new, rather than expanding existing assets like Enbridge. Time will tell which is the superior strategy.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.