Content

Strategy

The Company seeks to go beyond the traditional regulated utility business model to create additional value for customers. In addition to incentive tolling models as discussed, the Liquids Pipelines strategy focuses proactively on understanding Western Canadian supply and downstream demand fundamentals and then proposing timely new or reconfigured infrastructure solutions to improve customer profitability.

Supply and Reserves

The Liquids Pipelines growth strategy is based on the development of the vast resource of the Western Canadian Sedimentary Basin (WCSB). Increasingly, development of the oil sands resource is driving investment opportunity. The NEB estimates that total Western Canada production will be 2.5 million bpd1 at the end of 2007. At the end of 2006, remaining established conventional oil reserves in Western Canada were estimated to be 3.7 billion barrels2 and remaining established reserves from oil sands were estimated at 173 billion barrels3. Combined conventional and oil sands reserves put Canada second only to Saudi Arabia with 13.4% of the worldwide estimated proved reserves4. In addition, the vast Canadian oil sands resource is geopolitically secure and in close proximity to U.S. markets.

  1. National Energy Board 2007 Estimated Production of Canadian Crude Oil and Equivalent Table 1
  2. Canadian Association of Petroleum Producers Statistical Handbook 2007
  3. Alberta Energy and Utilities Board Alberta's Reserves 2006 and Supply/Demand Outlook/Overview
  4. Oil and Gas Journal's Worldwide Look at Reserves and Production, December 24, 2007

Demand

The Company's liquids pipelines depend on the demand for crude oil and other liquid hydrocarbons produced in Western Canada. Deliveries from the pipeline system are made in the Prairie Provinces, the Province of Ontario and the Great Lakes and Midwest regions of the United States. These deliveries are principally to refineries, either directly or through the connecting pipelines of other companies. Major refining centres are located near Sarnia, Nanticoke, and Toronto, Ontario; the Minneapolis-St. Paul area of Minnesota; Superior, Wisconsin; Chicago, Illinois; the Patoka/Wood River, Illinois area; Detroit, Michigan; and Toledo, Ohio. Through Company initiatives, Canadian crude oil has started to penetrate markets in southern PADD II (the U.S. Midwest) with the Spearhead Pipeline to Cushing, Oklahoma as well as the U.S. Gulf Coast (PADD III) via a third party pipeline system.

For the past four years, Canada has surpassed both Mexico and Saudi Arabia to become the largest crude oil exporter to the U.S.5 The largest market for WCSB crude oil is located in the U.S. PADD II region. Over the last two years, deliveries of WCSB crude oil into this market have increased by 50,900 bpd corresponding to the growth in WCSB crude oil supply in 20076,7. In the same two year period, there have been increased deliveries into other U.S. markets including PADD V (the U.S. West coast) and PADD III, where deliveries have increased by 35,300 bpd and 55,400 bpd, respectively. Deliveries into PADD IV (the U.S. Rocky Mountains) have declined by 11,800 bpd. Western Canadian demand is served by local supply and has remained relatively flat over the last two years6. During 2007, greater volumes of Western Canadian crude oil were transported to Ontario7, displacing Atlantic Basin crude oi16.

  1. "Table 38: Year-To-Date Imports of Crude Oil and Petroleum Products into the United States by Country of Origin, January - October 2007", Energy Information Administration/Petroleum Supply Monthly, December 2007
  2. "Disposition of Domestic Light and Heavy Crude Oil and Imports - 2007 & 2005", National Energy Board
  3. "2007 & 2005 Estimated Production of Canadian Crude Oil and Equivalent", National Energy Board
Enbridge System

Enbridge System Deliveries

(thousands of barrels per day)

Deliveries on the Enbridge System includes Canadian mainline deliveries in Western Canada and to the Lakehead System at the U.S. border and Line 9 in Eastern Canada.