Cenovus grows rail tanker fleet to 800 cars

Cenovus grows rail tanker fleet to 800 cars  : Thermal oilsands producer aims to move 30,000 bpd by end of 2014. Thermal oilsands giant Cenovus Energy Inc. says it will increase its rail transportation capacity to 30,000 barrels per day or 10 per cent of overall production by the end of 2014.

The ramp up from a 10,000-bpd goal this year is designed to reduce reliance on export pipelines and comes as 10 Nobel Peace Prize winners released a letter again urging U.S. President Barack Obama to reject the Keystone XL pipeline to the Gulf Coast.

“We do not have all of our eggs in the Keystone XL basket,” said Cenovus president and chief executive Brian Ferguson at the company’s investor day Tuesday in Calgary.

“Over the long term, we are targeting to move up to 50 per cent of our marketable production volumes by a combination of pipeline and rail firm service. We expect to begin railing bitumen next year, in 2014, and exit the year at 30,000 barrels per day of rail capacity.”

Cenovus has been moving southern Alberta and Saskatchewan conventional light and medium crude oil in rail tankers, some of which is supplying 3,000 to 4,000 bpd to the Irving refinery in St. John, N.B.

It confirmed Tuesday it has signed multi-year leases on 500 insulated cars which can be heated to transport bitumen and will take delivery in late 2014.

The deal will take Cenovus’ fleet to 800 rail cars.

“It’s a great option during periods of pipeline congestion,” said Don Swystun, executive vice-president of marketing, at the investor day. “And also opens up markets not accessible to western oil by pipeline. As well, rail provides the ability to move bitumen with less diluent.”

He added Cenovus is looking at participating in unit train terminals to aid in the loading of the cars.

In a research report Monday, Calgary investment bank Peters & Co. pointed out that some of the short-term economic reasons for using rail have disappeared as western Canadian oil price discounts blamed on the U.S. mid-continent pipeline bottleneck evaporate.

Rail transport costs more than pipe — Cenovus estimates $15 per barrel to move oil to the Gulf Coast — but wide differentials make it worthwhile if it fetches higher prices at the end market.

Peters estimates that crude rail volumes from Western Canada are now 175,000 bpd, with capacity increasing to 250,000 to 300,000 bpd by the end of 2013.

It added that about 675,000 bpd of North Dakota oil is now being shipped on rail and capacity is expected to increase to about 1.1 million bpd in 2014 — a development that will help Canadian pricing by freeing up space on pipelines.

At the investor day, Swystun said Cenovus is “banking on” Keystone XL proceeding and conceded that additional rail capacity announced Tuesday will not make up for its cancellation.

He said the company might slow conventional oil development but would likely continue to expand oilsands output if Keystone XL fails, relying on options including more rail capacity to reach markets.

Cenovus has committed to move up to 175,000 bpd to the West Coast on the proposed Northern Gateway pipeline and the Trans Mountain line, which is seeking approval for an expansion.

It hopes to move 150,000 bpd on the Keystone XL and the Enbridge U.S. Gulf Coast systems and confirmed it is taking part in TransCanada’s Energy East open season to take crude to the Canadian East Coast.

Ferguson pointed out that Cenovus’ oilsands output growth has exceeded forecasts made three years ago and is expected to rise to more than 400,000 bpd by 2023.

Total output including conventional oil and liquids is to rise to a net 500,000 barrels of oil by 2021.

Cenovus has regulatory approval for six new oilsands phases of 40,000 to 50,000 bpd each at Christina Lake and Foster Creek, the northern Alberta projects it shares with ConocoPhillips.

It expects approvals for Grand Rapids (180,000 bpd) and Telephone Lake (90,000 bpd) oilsands projects before or just after year-end 2013


Source : calgaryherald

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