Enbridge, a leader in the global energy sector, is confident about the future of crude oil demand and its ability to provide substantial returns to shareholders. As the operator of North America’s longest and most intricate oil and liquids transportation network, Enbridge currently moves 30% of all the oil produced on the continent. With a nearly 7% dividend yield that has been steadily increasing for 29 consecutive years, the company is positioning itself for continued success well into the future.
Enbridge expects the demand for oil to remain robust through at least 2050, fueled by a growing global economy and increasing consumption in developing nations. The company’s leadership predicts that global crude oil demand could exceed 100 million barrels per day (BPD) by mid-century, potentially surpassing 110 million BPD. This optimistic outlook is significantly higher than the International Energy Agency’s forecast, which sees demand dropping to 97 million BPD by 2050.
This positive projection bodes well for Enbridge’s core business, as it generates fee-based cash flow from the volumes of crude oil flowing through its pipelines, being stored in its terminals, and processed through its export facilities. Enbridge’s liquids pipelines business is expected to contribute about half of its annual earnings in the near term, a slight decrease from last year’s 57% due to the acquisition of three natural gas utilities from Dominion. Nevertheless, this segment remains a crucial source of revenue and cash flow.
Enbridge is actively investing in the expansion of its oil infrastructure to capitalize on expected demand growth. The company is currently investing $300 million across three key projects, including the expansion of the Gray Oak pipeline by 120,000 BPD, the addition of 2 million barrels of storage capacity at the Enbridge Ingleside Energy Center, and the construction of the Enbridge Houston Oil Terminal. These projects are designed to strengthen Enbridge’s position in the North American oil market and enhance its export capabilities.
The company is also exploring further opportunities for crude-related expansion. In the coming years, Enbridge plans to increase the capacity of its Mainline oil pipeline system in Canada by up to 150,000 BPD. The company sees a significant opportunity in the export market, which is expected to drive additional growth in its liquids pipeline business.
Despite its bullish stance on crude oil, Enbridge is not solely relying on oil for its future growth. The company has been steadily diversifying its portfolio by expanding its natural gas and renewable energy businesses. In 2017, Enbridge significantly boosted its gas transmission business by acquiring U.S. gas pipeline giant Spectra Energy for $28 billion. Today, the gas business contributes around a quarter of Enbridge’s earnings, a figure that is expected to grow as the company continues to invest in gas infrastructure, including new pipelines and a liquified natural gas (LNG) export terminal.
Enbridge’s acquisition of three natural gas utilities from Dominion will also enhance its stable gas distribution earnings, increasing their contribution from 12% to 22% of the company’s income. This figure is projected to rise as Enbridge allocates billions of dollars to expand its gas distribution and storage capabilities over the coming years.
In addition to its traditional energy businesses, Enbridge has a growing renewable power division, which currently makes up about 3% of its earnings. The company has developed a range of onshore renewable energy projects in North America and has a significant offshore wind energy presence in Europe. Enbridge is committed to expanding its renewable energy portfolio, with several projects under construction aimed at boosting its renewable-powered cash flows. The company is also investing in other lower-carbon initiatives, such as carbon capture and storage, blue ammonia, and green hydrogen.
Enbridge’s diverse investment strategy positions it well for sustained cash flow and dividend growth, even as the energy landscape evolves. By reducing its reliance on oil and investing in gas and renewable energy, Enbridge aims to ensure that it can continue to pay its high-yielding dividend for decades, making it an attractive option for income-focused investors looking for stability and growth.
