This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Welcome to the Enbridge Incorporated First Quarter 2022 Financial Results Conference Call. My name is Justin, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session for the investment community. During the question and answer session, if you have questions, please press star 1 on your touch-tone phone. Please note that this conference is being recorded. I will now turn the call over to Jonathan Morgan, Senior Vice President, Capital Markets. Jonathan, you may begin.
spk07: Thank you. Good morning, and welcome to the EmberJink first quarter 2022 earnings call. Joining me this morning are Al Monaco, President and Chief Executive Officer, Vern Yu, Executive Vice President and Chief Financial Officer, Colin Grunding, Executive Vice President, Liquids Pipelines, Cynthia Hanson, Executive Vice President, Gas Transmission and Midstream. Michelle Herdins, Senior Vice President and President, Gas Distribution and Storage. And Matthew Ackman, Senior Vice President, Strategy, Power and New Energy Technologies. As per usual, this call will be webcast, and I encourage those listening on the phone to follow along with the supporting slides. We'll try to keep the call to roughly one hour. And in order to answer as many questions as possible, we will be limiting the questions to one plus a single follow-up as necessary. We'll be prioritizing questions from the investment community, so if you are a member of the media, please direct your inquiries to our communications team, who will be happy to respond. As always, our investor relations team will be available following the call for any follow-up questions. And on to slide two, where I'll remind you that we will be referring to forward-looking information on today's presentation and Q&A. By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We'll also be referring to non-GAAP measures as summarized below. With that, I'll turn it over to Al Monaco. Good morning, everyone. Well, to start, what you see here is the first of 80 turbines being installed at our 480-megawatt St. Nazaire wind project off the west coast of France. Just to give you a sense of the magnitude of this infrastructure, the towers are 170 meters in height, and each blade is about the same as the wingspan of an Airbus 380. So pretty exciting time in our renewables business, and more on that later. First of all, recent events are very troubling. and we're all very concerned for the people in Ukraine. Many of our staff have connections to the region, and we're supporting them. What's happening is also we're dealing a lot about global energy markets. So I'll start off with how we're thinking about that, followed by our business update. And Vern will cover our financial results and outlook. Before that, this slide captures our Q1 highlights. It's been a good start to the year. All four businesses performed well, operating at or near capacity. That translated into strong Q1 members, and we're on track to achieve 22 guidance. The balance sheet's in good shape, and both S&P and Fitch reaffirmed our BBB high ratings. We've got 10 billion in projects in execution, with 4 billion slated for service this year. So far in 22, we've added another billion to our project backlog That'll support post-24 growth. And we'll update you on two carbon capture opportunities we're very excited about. More broadly, we're seeing a pickup in customer infrastructure, especially LNG export. Recall there's $5 to $6 billion a year of conventional and low-carbon opportunity enterprise-wide in the hopper. Those will go through our capital allocation filter, which Varen will also cover later on. So on to energy markets. Coming into the year, we saw growing demand and underinvestment in supply move energy prices higher. The Russian-Ukraine war has worsened the demand-supply gap, obviously, but it's also put energy back in the spotlight. Energy markets are an inflection point, and we're in an energy crisis. There are three things that come out of this. Any way you look at it, global energy supply will need to increase to address national security risks, affordability, and reliability. That means we'll now need an energy supply buffer and greater diversity of that supply to manage those risks. Europe's heavy reliance on Russia is driving this, of course, but the impacts are broader and global, regardless of when this war ends. Second is the energy transition. We'll need to accelerate low-carbon investments as well to meet demand, achieve emissions goals, and as part of the security buffer. To make that happen, we'll need to pick up the pace on proven ways to grow low-carbon fuels like RNG, hydrogen, and especially carbon capture. And that'll mean leveraging existing transportation and storage infrastructure more quickly like ours. It also means much more investment in natural gas to provide reliable, lower carbon base load power and to enable renewables. Third, North America will play a much larger role in the global energy market, and here's why. The North American energy advantage that we've been talking about is even more evident today. Massive, low-cost reserves and the technology to produce them with the lowest carbon intensity. And of the 10 largest global producers, Canada and the U.S. are number one and two on sustainability. You can see that with the ESG scores on this chart. North America will be the supplier of choice. You saw that already with the U.S.-EU announcement to work together. And Asian markets are also looking to secure long-term supply. The biggest opportunity in our view is natural gas exports with the potential for over 30 BCS a day. That's more than triple last year. And of course, crude exports are set to grow by 50%. All of this is very positive for infrastructure pointed at Tidewater. Remember as well that the North American grid is integrated. So growing global demand and exports is upside to Canada and the U.S., What you see here is underpinned by strong energy demand. We're going to need more supply of both conventional and low-carbon energy, and now that'll be needed faster. 80% of world demand comes from hard-to-abate industrial uses and heavy transport, and of course, pet can demand is growing. It's also clear today that natural gas will be essential to meeting demand. Even before the crisis, Europe amended its taxonomy for clean energy to include natural gas. On low carbon, $25 trillion will need to be invested with renewables, the largest component, along with RNG, hydrogen, and again, carbon capture. We are headed in the right direction as the tax credits in the Canadian government budget incentivize carbon capture, and there are U.S. proposals to expand 45Q. So what does all this mean for our strategy? This slide recaps the two-pronged approach we outlined for you at Enbridge Day. Our strategy is to invest in both conventional and low-carbon energy, and that makes even more sense today. On the conventional side, we'll focus on optimizing throughput and modernizing our systems. On low-carbon, we'll continue to align with the pace of transition, and through 2025, we see over $4 billion of low-carbon opportunities. Finally, any new investment, conventional or low-carbon, will need to meet our investment criteria, so that won't change. When you step back from all of this, we believe the two-pronged strategy approach makes even more sense today, where energy security is back in the spotlight and where demands for conventional and low-carbon energy supplies will continue to rise. Now to the business updates on gas transmissions. Very strong volumes with Texas Eastern hitting 16 of its top 25 peak days ever. We're on track to put U.S. $1.2 billion into service this year, and that's on top of the $2.4 billion last year. The lion's share of spending is on new compression or modernization more generally. And along with our solar self-power projects, we're lowering emissions. For example, our current modernization program will take out 182,000 tons of CO2 per year. We're also excited about more organic growth. We've got good optionality to support growing domestic demand, and it's pretty clear more capacity in the U.S. Northeast is needed to manage disruptions and peak demand. We all know what's happening with global gas prices, but it's not pretty for U.S. Northeast consumers either, with gas prices at roughly 5x Henry Hub. This situation screams for more infrastructure, especially given increased supply variability from offshore wind that's coming, and more displacement of coal, of course. We put Phase 1 of our Appalachian to Market project into service last year, and Phase 2 is in pre-construction. Building Greenfield is tough sledding, of course, these days, but these expansions are executable and cost-effective, and there's more that we can do. LNG exports is a big opportunity with momentum building across the U.S. Gulf and now more so in Western Canada. Our Texas Eastern system feeds LNG along the Gulf Coast. We supply four plants today with about two BCF a day. We've locked up capacity agreements with three more LNG projects that could add up to seven BCFs a day and over $2 billion of new investment. Plaquemines LNG is now fully contracted and likely going ahead, which will drive $400 million on our Venice extension project. Not in the secured category yet, but we expect it to be shortly. Texas LNG and Rio Grande LNG are also progressing often. In fact, earlier this week, you saw next decade landed a 15-year SPA with Engie to support Rio Grande. Seeing good momentum then here with both projects potentially reaching FID later this year. And by the way, on Rio Grande, that could drive FID on our Rio Bravo pipeline. Western Canada is another big growth region for us. Shifting fundamentals are bringing Western Canada to the fore once again. You've got a world-class, liquids-rich resource base that rivals the Marcellus and the Haynesville. And operators have done every bit as good a job unlocking reserves. We can see production grow 50% for LNG export here and regional demand growth. With growing demand in Europe for U.S. LNG, Western Canada can step in to fill the gap. Proximity to Asian markets provides two to four weeks reduced shipping time and lower emissions. LNG break-evens in Canada at roughly $6 to $8 in MMBTU rivals the U.S. Gulf Coast and looks very favorable if you look at East Asian LNG prices somewhere in the order of $30 for an MMBTU in Q1. LNG Canada is in construction, of course, and Wood Fibre is advancing early-stage construction activity. We're the main conduit out of the Montney and Beak Basin, so all of this bodes well for upstream expansion on our BC pipeline system. On that note, we launched a buy-new open season today for 400 million cubic feet on T-North. That'll be a $1 billion expansion. Wood fiber LNG is contracted on T-South with volumes currently flowing to the Pacific Northwest. Once they reach FID, we'll need to create new capacity to replace volumes currently moving south. And depending on wood fiber's FID, binding open season on T-South for later this year. And by the way, this could also require further upstream expansion So all of this is shaping up to be a big opportunity in multi-years, which again goes to prove the value of type in the ground.
spk01: Now, longer term, we also have pathways to the coast, the Pacific Trails and the West Coast Connector Corridors.
spk07: We look at these as low-cost options on the future of LNG exports. Now, for either of these to move forward, we'll need to see a clear path to execution.
spk01: support and commercial for those.
spk07: Turning to liquids, Q1 mainline throughput averaged 3 million barrels per day. Seasonally, we'll see a more concentrated maintenance season in Q2 than we usually do, offset by stronger volumes in the back end of the year. But we remain on track for the full year average utilization of 2.95 million barrels per day that we guided to in December. On mainline tolling, healthy dialogue here, ongoing with shippers. As you may recall, we shared our cost information, which was the precursor to negotiations. Our sense is that shippers would prefer another incentive tolling deal. Of course, that model worked very well for 27 years and aligned us with the shippers. But as we've said, we'll need to see an appropriate return given the risks we managed under that model. Given it's often challenging to come to consensus we're preparing a cost-of-service filing, which is a very good alternative for us. The schedule is the same as we showed you last time, where we expect to have a new tolling construct in place in 2023. Now, more broadly on liquids and how it fits within the shifting energy landscape I talked about earlier. Our scale and access to the best markets provides a ton of optionality and value for our customers. Our focus is adding highly executable capacity to the Midwest and the Gulf. Expansion options are right size and can be called on as production grows. In total, we've got roughly 400,000 barrels per day of egress opportunity on the main line and express. We're also developing a new Gulf Coast path via Pony Express that will link up with Seaway. Downstream, we're continuing to develop the Houston Terminal opportunities. And since we acquired Ingleside, we've seen increasing interest on several fronts, which is already proving out the upside. On conventional, we're progressing a 2 million barrel storage expansion. The terminal is already permitted for five, actually, so we can move that one along once we get commitments. There's also potential emerging for NGL exports, and stay tuned for more on that over the next while. As you saw today, we're also now developing an integrated solution for blue hydrogen and ammonia production with humble oil. Now the key to this concept is the integrated value chain through to exports. Texas Eastern runs just north of Ingleside, so it nicely is positioned to provide feedstock for hydrogen. And it looks like the geology in this region is suited for carbon capture and storage. The hydrogen and ammonia production would be destined to meet local demand and the export market, which of course is booming. So multiple upsides at Ingleside. Now we're driving capture in Alberta. In March, we were awarded the right to move forward on our Wadham storage hub, so we're now validating the geology. Another positive was the federal government's investment tax credit, 50% on capture and 37.5% on transportation and storage. This will go a long way to help make the numbers work. At 4 megatons per year captured with upside to that over time, this project will be one of the largest globally. We've given you a preliminary timeline here, which could see the project in service as early as 2026. On our utility, population growth will drive new gas connections and expansion of transmission and storage. In fact, we've just FID'd an expansion of our panhandle system. It's a $300 million investment to support growing greenhouse and power demand market in Ontario. So the utility continues to generate about a billion to a billion and a half of rateable annual investment. So it's a great business and a real gem in our portfolio.
spk01: According to exceeding our resource target, what we have in execution through 2024.
spk07: In France, we have four offshore projects in construction, including our first floating facility.
spk01: As you saw earlier, we're installing turbines at St. Mazaire. And we're in the fabrication phase at CECOM. And pre-construction projects in progress, seven of those should enter this year. And remember, we can build these quicker. We're also moving along about 3 gigawatts of opportunity for the next phase of growth post-2024.
spk07: Before I pass it over to Vern, as you heard, we're seeing lots of positive fundamentals right now with the conventional and low-carbon fund. So he's going to remind you about our framework and discipline around putting free cash flow to work and maximizing value. Over to you, Vern. Thank you, Al, and good morning, everyone. Our first quarter results were up significantly over 2021 on solid operational performance across all of our businesses. And we saw the benefit of $14 billion of capital that we put to work last year. In liquids, the main line moved about 3 million barrels per day in Q1, up 9% year-over-year, taking advantage of the additional capacity from Line 3. As a reminder, until we finalize the tolling for the main line, we'll be including a provision in our results for that segment. Our Ingleside facility, with its highly contracted cash flow, is performing as expected, and it should remain strong to the balance of the year. Gas transmission utilization was solid, and the $1.4 billion of expansions added to our BC pipeline system last year are driving growth in UW. It's business as usual at the utility, with customer growth and colder weather making positive contributions in the first quarter. In the quarter, our renewables business benefited from higher wind resources. Energy services continued to experience narrow basis differentials and backwardation in the quarter, so below expectations here. Finally, lower capitalization of interest expense associated with line three replacement has resulted in higher financing costs. So it's been a very solid start to the year. Let's move over to our outlook. With the strong first quarter, we're confident we're on track to achieve full year guidance. Our systems are expected to continue to be highly utilized, including the main line, which is on track for 2.95 million barrels per day on average for the year. As always, This factors in a seasonal drop in throughput in the second and third quarters due to upstream and downstream maintenance activity. Our exposure to rising commodity prices remains limited, but we expect some modest upside in Oxygen and DCP. Gas distribution and renewables remain on track to meet their annual guidance. We're expecting energy services results in Q2 to be comparable to Q1, a slight headline for the year. Energy services outlook improves for 2023 and beyond, as we have transportation and storage contracts expiring at the end of this year and early in 2023. We're well protected against inflation. As a reminder, 80% of our revenue is some form of inflation protection through our various tolling mechanisms. Revenues are adjusted through regular rate filings or directly through embedded contractual inflation escalators. Our secure capital has been largely contracted for 2022. which provides good protection against capital cost increases, and we continue to manage our capital programs through active supply chain procurement and fixed price EPC contracts. Our financing costs are also well protected. About 90% of our debt is fixed rate debt, minimizing our near-term exposure to rising interest rates, and we continue to optimize our financing. We're generating a lot of cash flow and more investment capacity. So let's move on to our capital allocation framework. Our priorities remain unchanged, and we're making good progress in all fronts. Our balance sheet is in great shape, and we're on track for debt divot to be at the low end of our target range by the end of the year. S&P and Fitch are which has reaffirmed our BBB-high stable credit ratings. We've increased our dividend 3% in 2022. That's our 27th consecutive annual increase. And we initiated our share buyback program. That's the model going forward, rateable dividend growth, supplemented where it makes sense with share buybacks. Our cash flow and balance sheet leave us with about $5 to $6 billion of annual investment capacity. We expect between $3 to $4 billion will be deployed to low multiple organic expansions and system optimizations, along with utility rate base and modernization capital in gas transmission. That leaves about $2 billion per year available for more organic growth, asset acquisitions, share buybacks, or debt repayment. We'll review all of these options as we go through the year to ensure that we continue to maximize shareholder returns. All of these options will need to meet our low-risk business model, exceed risk-adjusted hurdle rates, have a strong strategic fit, and align with our emission reduction goals. As always, we will continuously evaluate options to recycle capital where appropriate to supplement the $5 to $6 billion of annual investment capacity. Our secured capital bucket continues to grow, so let's move to that. Today, our secured capital program sits at just over $10 billion. These projects will support our 5% to 7% DCF per share growth outlook over our three-year planning horizon. The $10 billion in secured capital includes $1 billion that we announced so far in 2022. All of this secured capital is highly contracted or rate regulated, which fits our low-risk commercial models. And as you just heard from Al, we're advancing a number of exciting opportunities across all of our businesses. This will drive growth in 2024 and beyond. Before I turn it back to Al, let me spend a minute on how we're advancing our ESG priorities. As you know, ESG is foundational to our business, and our goal is to maintain and enhance our ESG leading positions. We are embedding our ESG priorities into our compensation and how we finance our business. Our strategic plans and annual budgets also incorporate the strategies and the capital expenditures that are needed to meet our emissions goals. We believe this differentiates us in our sector and better aligns us to all of our stakeholders. customers, investors, communities, and many more. We're making good progress on the emission targets we set in late 2020, and we continue to challenge ourselves to do better. In addition to our 2020 emission targets, earlier this year we made some additional commitments. These include working with organizations to support the development of emissions reduction guidelines for our sector, engaging with our suppliers to generate further scope 3 emission reductions, and provide more reporting on different net zero scenarios. Our sustainability report, which will be issued in June, will provide more information on how emission reduction targets are factored into all of our capital investment decisions. It will provide further detail on our biodiversity programs, provide more transparencies on our path to net zero, and provide an update on our approach to Indigenous reconciliation. So in a nutshell, we continue to raise the bar on how we approach ESG. With that, I'm going to turn it back down. Thanks, Vern. A few takeaways to close. The energy crisis demonstrates once again that all sources of energy are needed to assure affordable, reliable, and secure energy while achieving climate goals. North America is an ideal spot to be part of the solution, and Enbridge plays a key role. Our footprint, access to the best markets, combined with being ahead of the curve on low carbon puts us in excellent position. Our strong balance sheet and differentiated approach to sustainability means we're a natural midstream partner to upstream and downstream customers. Finally, we'll continue to take a disciplined approach and not compromise our low-risk business model. In taking together, we think this provides a great opportunity to grow the business and a solid value proposition for our investors. I'll now turn it back over to the operator for Q&A.
spk00: Thank you. We will now begin the question and answer session. If you have a question, please press star 1 on your touchstone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star 1 on your touchstone phone. Robert Kwan from RBC Capital Markets is on the line with a question.
spk03: If I can ask first about the capital allocation priorities for that $2 billion, and clearly in the first quarter you showed that there's It's not either or, and there's a number of things going on, but I'm just wondering with some of the changes in the environment, whether that's the energy security opportunities, energy transition, as well as the higher share price. Can you just talk through how some things have just moved around since you last spoke about this on the last quarterly call?
spk07: Yeah, that's a good question to start, Robert. Well, first of all, as you heard through those remarks, I think there's been definitely a positive shift in the fundamentals. We certainly will see more on the hopper for sure. I think it's probably too early to tell whether that changes the broader outlook. And you heard the comments that were made around capital allocation discipline. I think the way we're looking at it at this point is there's really no change to how we're looking at allocations. Discipline is going to remain around the balance sheet, the dividend growth, and we're going to continue to really make sure that we invest wisely. So in a nutshell, I guess, a lot more opportunity, but we'll continue to put a pretty strong filter on what we're doing and comparing opportunities that we have to invest capital with each other. And so that's really how we look at it, Robert. No major change right now, but certainly more opportunity ahead.
spk03: I just was wondering as part of that, is there maybe a bit more of a bias to reducing debt effectively, just opening up balance sheet capacity for new projects and a specific project that, like, It would be interesting to get your comment on. It's just there's a lot of stuff going on in BC, as you highlighted, and especially that T-cell expansion is pretty big. So if with fiber goes ahead and just with growth in the LDC, do you have a sense or can you provide some color as to whether you think supply diversity is one of their goals and, therefore, you know, How's your project position versus say something along the Southern crossing line? Or do you see the potential for both of those projects to go ahead?
spk07: Yeah, I think our project is definitely in great position there, Robert, for a bunch of reasons. The main one has to do with competitiveness of the toll and that stems in large part from the scale of the system. The other part is, if you recall, the West Coast system is more or less a north-south header, and that gives us opportunity to expand to the West Coast, but also to continue volumes down south. As to the capital allocation system, implications there and the size of those projects. If you think about it, we're throwing off, as Vern said, a lot of free cash flow right now. And we will continue to do that over the next two to three years. So the projects that we're talking about are certainly not cash consuming, let's just say, in the next couple of years in any material way. So in a way, to get back to your original point, You're sort of building up some excess capacity here while those projects will come to fruition in the next two, three, four years capital spending wise. As far as The balance sheet, you know, Vern can expand on this, but essentially we're in very good shape right now. I think we've been pretty clear about the 4.5 to 5, and as he said, we'll be near the bottom of the range by the end of this year. And going back to what I just said, it's possible that with free cash flow the way it is, we could pop below that 4.5 in the next little while. As you point out, these larger projects come to fruition, so in effect we'll be building up some capacity for that.
spk03: That's great. I appreciate the color. Thanks. Okay.
spk00: Jeremy Tonnet from JP Morgan is on the line with a question.
spk04: Hi, good morning. Hi. I just want to start off with the new Ingleside Hydrogen Ammonia Initiative, as you outlined there. Just wondering if you could peel in a bit more, I guess, on what some of the drivers are that could help you reach a positive FIT. Who are the end customers that you're looking to service here? What type of contractual support are you expecting here? What type of timeline? Just more color on this would be helpful. Okay.
spk07: Well, I'm going to start, and then we'll get Colin to provide some more details. You know, this is a great example of how pipe and facilities that are in place gives you an advantage. And, you know, just broadly speaking in this region, Jeremy, we've got, you know, a big gas header along the Gulf. We've got Seaway. We've got Ingleside now. And a bunch of projects in development. And as we went through, pretty strong fundamental support here export-wise. Obviously, gas is critical. CCUS is critical. So this has really a bunch of attributes to it that go to that value chain I was talking about. And we've got essentially a brownfield industrial complex here with some very big players. So it's naturally helpful for us to grow from this area. And the business model should be fit quite well with what's going on. So that's sort of the big picture here. These are sizable opportunities that can really move the needle. So that's the background and context of how we're thinking about the region generally. But maybe Colin can provide some context around customers and markets specific to this opportunity and the park.
spk05: Yeah, hey, thanks, Al. Morning, Jeremy. Yeah, so... Thinking about this project, probably with a capital cost of $2 to $3 billion, we're JVing, so we have half of that. In terms of commercial construct, of course, we'd like to term this out under a take-or-pay type arrangement, and we'll be jointly marketing the facilities with our partner. I think European... fertilizer companies, domestic and European power gen with respect to hydrogen. So the concept is pretty novel, exporting decarbonized fossil fuels. I think you'll see more of these. And of course, the Ingleside facility has 54 foot dredge depth now ample space to build facilities and is uh close to open water so that's that's the formula and and model we're looking for here got it thank you for that um wanted to pivot uh to the wcsb here and uh take away situation just
spk04: We see a few different gives and takes here as far as egress is concerned. With Trans Mountain, there's delays. The Canadian government financing support is changing. They still need to build through sensitive population areas. So there's headwinds there, uncertainty there. But at the same time, even with oil at $100, we haven't really seen material FIDs out of the WCSB. Do you see much growth out of the basin and shipper demand for more capacity that might underpin a new CTS if there's more take-away demand and CTS seems like maybe it's a better option to incentivize that? Or do you not see this demand materializing and basin doesn't have much growth and that feeds into cost of service being more likely outcome?
spk07: Okay, I'll start again, Jeremy. Maybe I'll start this way. The fundamentals here for the oil sands basin and the basin generally in Western Canada are pretty positive. I think we all know about the attributes around the size of the reserves, the surety of getting those to market. And, of course, the upstream group has done a tremendous job both in terms of lowering cash costs, but also on the emissions front. So I think fundamentally, we're very positive on that part. The signals I think that they probably need to see going forward. Obviously, we've got very high prices right now, so that's positive. But They're going to want to see some stability in that long term. We don't need $100 oil for that to happen, but certainly clarity on where it's going longer term. They're going to be looking at capital efficiency solutions, debottlenecking first. Everybody's concerned about supply chains. And, of course, as you refer to, egress of the basins. And that's where we come in, which, you know, as we alluded to in the remarks, the mainline is extremely well positioned for this. The mainline holding agreement actually will be important in that we need to see clarity on the commercial underpinning for those projects that we have in the queue here, which Colin can get to. But we need to see clarity on that in order for us to continue to incrementally expand. And again, in this environment, incremental expansion, optimizations on the system are ideally suited, I think, for where the basin is and what these producers need to see in order to invest additional capital. So the basin generally will be probably behind in its ability to react to increasing prices here as we've seen compared to say the Permian just because of the nature of what we're talking about in the oil sands, longer dated investment profiles. So that's the bigger picture. Colin, do you want to give some specifics around where we are on the expansion opportunities and the timing?
spk05: Yeah, thanks Al. So we're keeping our mainline expansion opportunities ready to go here and advancing long lead items to enable them to be there. We believe industry will continue to want some egress or some insurance egress, having not had any for decades, and we'll potentially weave that into any commercial arrangement we negotiate here. The timing of those will have to be TBD, but we're keeping them warm, Jeremy.
spk07: I'll just add one more thing here. I call you mentioning TMX, Jeremy. In the bigger picture here, again, if you think about it, we've got what would be two nice pathways through to the Gulf Coast. and that will continue to be an extremely strong market uh the the thing that's happened recently here in terms of the security buffer that we've been talking about is um you know the export position that we have relative to those two paths i think is going to be uh ideal in terms of the longer term future of heavy oil coming out of western canada we know that the Gulf Coast is a great destination for that and will continue to be. But now we've got this additional opportunity to really generate greater exports out of that region, too. So that bodes well for us, I think.
spk04: Got it. That's helpful.
spk00: I'll leave it there. Thanks. Okay. Thanks, Jeremy. Rob Hope from Scotiabank is on the line with a question.
spk06: Morning everyone. I want to circle back on the BC expansion project. When you take a look at the T North, I guess the first phase of the expansion as well as the second phase of the expansion, specifically in the first phase, is that dependent on the T South expansion and wood fibre or could we see that progress independently just to serve LNG Canada demand?
spk07: I'll go quickly and then Cynthia will chime in. So on T North, that goes ahead regardless. So that's the binding open season we're talking about. On T South, I think that is most probably dependent on wood fiber LNG sanctioning. So that's the short answer. Cynthia, do you have anything to add there?
spk10: Yeah, thanks, Al. I think you covered it in your earlier remarks. We see that volumes that are currently going to be assigned to work fiber serving the U.S. Pacific Northeast. So when those 300 million cubes a day move towards fiber, then we're going to need to come in with some additional supplies. So that's why we'll really have that opportunity to expand T-cells when that happens.
spk06: All right, thanks for that. And then, you know, BC can be a challenging place to build pipe as, you know, Coastal and Trans Mountain are learning. You know, how do you, you know, secure the supply chain and the development pipeline to give you confidence in these large investments?
spk07: Well, I think, again, I'll go first. On the west, I mean, this is really the crux of the advantage, I think, here in this particular case, whether you look at, you know, the community aspects of building new infrastructure and obviously the indigenous groups that are along the right-of-way. The fact that we've been there for so long, the fact that we have good relationships, the fact that in this particular situation, uh we're not doing a lot of um you know looping or or twinning of pipelines here so i think in this case uh you know we we're we're in pretty good position uh to to expand the t cell system certainly that goes for t north as well uh supply chain wise uh you know that's something we're going to have to manage uh everybody's i think exposed to increasing costs here, inflation and so forth. So it's something we can manage. We've got, you know, pretty in-depth supply chain group here that looks at this strategically and can really bring the size of our company to bear in terms of base loading particular contractors. So I think we're in reasonable shape these days as far as you can be in a tough environment permitting-wise and in an inflationary setting. So... Do you want to add anything, Cynthia?
spk10: We have had, obviously, as Al said, a long history of operating very successfully in BC. The challenges that everyone is facing, it's not just in BC, as we know. We need to continue to focus on our customers and our stakeholders. We're doing a lot of work. We continue to want to progress these projects, but we do need that stakeholder support and customer support. So if we focus on those fundamentals as we have in the past and really allow us to continue to be successful.
spk00: Thank you. Thank you, Rob. Franit Satish from Wells Fargo is on the line with questions.
spk05: Thanks. Good morning. On the Ingleside facility, I just wanted to get an update in terms of the interest you're seeing from customers to potentially export NGLs from the facility. Sounds like you're getting some traction there. And if you did export NGLs, would you be looking to export LPGs or other NGL products? How much would you export, and where would you source the NGLs from? Okay. Colin, do you want to take that? Hey, Pernice. Yeah, good questions. So we're looking at various forms of purity NGL export out of Ingleside. We won't be too specific, but we would be sourcing them locally, obviously, and these are under development. So I think I'll just leave it there for now. Okay, got it. And then just staying in the U.S., so gas production is, is increasing both in the Northeast and the Hainesville, and both regions have some egress constraints. And recognizing that you have pipelines in both areas, are you evaluating any potential projects to improve takeaway? And do you have the ability to do any brownfield expansions, or would they need to be greenfield at this point?
spk10: Yeah, thanks. Yeah, we obviously have our Texas Eastern system that leaves us in a unique position to serve heat field production and get to the Gulf Coast markets. with our existing infrastructure. So there are some opportunities for both brownfield and obviously greenfield in this space. So we're continuing to have those conversations with the key players, our key customers, to figure out the best path forward to serve the incremental needs.
spk00: Got it. Thank you. Robert from CIBC is on the line with a question.
spk08: Yes, thank you. A lot has changed since we last spoke. I'm wondering if you can discuss if there's been, if you feel there's an understanding by policymakers, especially in the U.S., for the need to get permitting moving in order to build the infrastructure that's required to deal with this energy crisis.
spk07: Well, let me put it this way, Rob. I think we're certainly hearing the right things. And how would I put this? They certainly get it. And as you can imagine, impact on consumers all the way from home heating costs to prices at the pump. I think everybody understands the situation really well. I'm not convinced yet that we're going to see quick action to provide additional clarity on regulatory permitting. I'm just being honest there. There's a myriad of issues, of course, general policy issues related to acceleration of lower carbon opportunities. You've got federal versus state jurisdictions and quite a complex array of issues. permitting agencies and approvals that are required so I think we all know what needs to be done here no doubt I think we're going to need a little bit of time for this to unfold but certainly if there ever was a time in terms of the signals that are being sent around the impact on the consumers this is it and so we're hopeful and you know we continue to do a lot of work on this As you know, these roles change over time that we have and a big part of the role these days and all the people around this table. is engaging with governments and explaining what's happening and what we need to see in order to put capital to work. We have that capital. We've got the capability to work through these regulatory processes and permitting issues, but certainly we need more policy support at a very high level, and hopefully that will come through. I will add, too, though, that You really have to be skilled in this area these days, regardless of the policy issues that you're alluding to. In terms of the ground campaign, if I can put it that way, Cynthia alluded to this, engaging communities, the work we do with Indigenous groups, these are the things that really help get projects moving. So those are the general thoughts.
spk08: Yeah, okay. Thank you. That's helpful.
spk07: Thanks, Rob.
spk00: Teresa Chen from Barclays is on the line with a question.
spk09: Thank you for taking my question. First, I wanted to ask about the mainline system. In the context of changes in global flows accrued and The Russian production and exports on the crude side currently seems to be rerouted. but certainly some long-term uncertainty there, coupled with Mexico's publicly expressed intention to consume more and more of their domestic production, which is heavy sour in nature, there does seem to be an incremental bid in the marketplace for that sour barrel. And I was wondering, are these structural themes a factor into your discussion with shippers about the rate? And how do you view
Disclaimer