Enbridge on Friday did not greenlight the second phase of improvements to the Mainline system and offered no timelines for a final decision.  Postmedia file

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Enbridge Inc. is holding off on a new phase of expansion for Canada’s largest oil pipeline, which delivers Alberta crude into the United States Midwest. 

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The Calgary company on Friday did not greenlight the second phase of improvements to the Mainline system and offered no timelines for a final decision. 

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Greg Ebel, Enbridge’s chief executive, said in a release the project “has evolved into a broader suite of expansion opportunities.” He said the company is well positioned to provide export capacity “as greater clarity emerges around policies supporting production growth later this year.” 

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Analysts spent the morning asking whether oil producers signed up to fill an expanded Mainline. 

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The project under scrutiny is called Mainline Optimization Phase 2. It is not a new pipeline. 

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Enbridge would squeeze more oil through a pipe it already owns, using friction-reducing chemicals and upgrades to pumps and stations. Most of the work happens on land Enbridge already controls, which skirts years of hearings, landowner negotiations and court challenges that have stalled, delayed or outright stopped many other projects proposed in Canada. 

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Enbridge is pressing ahead with an American leg, moving oil from the Midwest to the Gulf Coast. The Canadian leg is the one on hold. 

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Nate Heywood, managing director, equity research analyst  at ATB Capital Markets, said in an interview Friday that oilsands producers do not have enough clarity on an agreement with the federal and Alberta governments on a proposed new pipeline to the West Coast. 

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And he says they may not be ready to sanction new production. 

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“They’re maybe not ready to make a positive final investment decision on their production-energy projects”, Heywood said. 

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Producers also have somewhere else to put their barrels. Aaron MacNeil, an analyst at TD Cowen, said several have already committed volumes to competing projects, including South Bow Corp.’s proposed Prairie Connector line into the U.S. and additional capacity proposed for Trans Mountain’s pipeline to the West Coast.  

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Those commitments are binding which leave producers with little room to move. 

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“Even if it doesn’t go ahead, they have to wait and see what happens before they can commit those volumes elsewhere, MacNeil said. 

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Neither analyst read today’s call as a retreat. 

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“It was a disappointment, obviously,” MacNeil said. “But net-net, there’s lots of opportunity for everybody.” 

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Heywood agreed. 

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“It doesn’t necessarily mean production isn’t going to grow. It’s just a matter of speed,” he said. “Enbridge is still positioned to benefit in the long term. It’s just getting clarity from a policy basis.” 

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MacNeil said the delay may say less about Enbridge than about how much bigger producers think they can grow. “Mainline Optimization 2 is a great project, and eventually it’s going to get done,” he said. “Maybe producers are saying, why don’t we try to get these more ambitious projects done while there’s a window of opportunity?” 

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The decision came as Enbridge reported second quarter earnings of $1.4 billion, or 64 cents a share, down from $2.2 billion and a $1.00 a year earlier. The company blamed most of the drop on paper losses on financial hedges rather than the business itself and left its outlook at 97 cent dividends unchanged. 

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