Enbridge to Acquire BP Cushing to Chicago Pipeline Opening New Markets for Canadian Crude July 15, 2003

abarrelfull wrote on 10 May 2012 14:22
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July 15, 2003

Enbridge Inc. announced today that it will purchase a 90% interest in the Cushing to Chicago Pipeline System (CCPS) from BP Pipelines North America Inc. for US$122 million. Subject to acceptance of proposed tolling arrangements by Canadian producers and regulatory approval, Enbridge intends to reverse the flow of the pipeline to transport Canadian crude south from Chicago to Cushing.

Enbridge will acquire an interest in the existing 22/24-inch diameter pipeline that runs 650 miles (1050 kilometres) from Enbridge's main terminal in the Chicago area to the North American crude oil hub at Cushing, Oklahoma, providing Canadian crude oil producers and shippers with access to new markets south of Chicago. Enbridge will propose integrated tolls from all receipt points on its Canadian mainline through to all its
existing U.S. delivery points plus those accessible from CCPS, including Cushing. Enbridge and BP will also cooperate to study delivery options for Canadian crude extending beyond Cushing to U.S. Gulf Coast markets.

CCPS has historically operated in south-to-north service with a capacity of 300,000 barrels per day, and includes 4.3 million barrels of tankage. Expenditures of approximately US$20 million would be undertaken by Enbridge to reverse the line, which could be completed by the end of 2004. BP will assist in the operation of the line during the transition. Upon reversal, the line would be renamed the Spearhead Pipeline, spearheading a number of Enbridge initiatives to provide producers of crude oil from the Alberta oil sands with access to new markets in the U.S.

If the necessary support to reverse CCPS is not obtained, Enbridge and BP Pipelines will explore other options to maximize the value of the system. Enbridge's investment would be limited to US$57 million in this case, and BP Pipelines would be entitled, for a period of nine months, to repurchase Enbridge's 90% interest at a $10 million discount.

"This proposal is a major next step forward on Enbridge's strategy of creating value for our crude oil shippers by providing access to new markets," said Enbridge President & Chief Executive Officer Patrick D. Daniel. "Our Oil Sands Markets Study indicates that refinery margins in the Cushing area will benefit from running Canadian crude, and aggregate netbacks to Canadian producers will benefit from market diversification. We are very pleased to be able to make this option available at a fraction of the cost of a new line. Assuming we complete this project in late 2004 it will be immediately accretive in 2005, with the potential for further investment to reach additional markets thereafter.

The Spearhead Pipeline proposal has all of the win/win ingredients which Enbridge favors in its customer relations, and we're delighted to be teamed up with the pipeline arm of one of the world's largest energy companies who we know as a strong partner from a number of other ventures."

"We look forward to working with Enbridge to make this opportunity available to shippers wishing to move Canadian crude oil beyond Chicago to Cushing and possibly points further south," said James Lamanna, President of BP Pipelines North America. "The
Spearhead proposal, if accepted, provides BP with the ideal combination of a favorable valuation for our CCPS asset and a crude oil transportation path of potential strategic
significance.

• Enbridge to Acquire BP Cushing to Chicago Pipeline Opening New Markets for Canadian Crude

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