Cenovus inks two crude-by-rail contracts while export volumes hit another record high
Cenovus Energy announced a three-year deal with Canada's CP Rail and CN Rail to transport 100,000 bbl/day of crude from its SAGD operations in Northern Alberta to the US Gulf Coast (USGC).
CN plans to start shipping crude from Cenovus' Bruderheim terminal sometime in the fourth quarter of this year, while CP will begin shipments from USD Partner's rail terminal in Hardisty in the second quarter of next year.
Last week, USD Partners announced a major expansion of its Hardisty terminal, soon to be expanded 50% to 225,000 bbl/day.
Cenovus CEO Alex Pourbaix says shipping crude by rail should help mitigate the ongoing pipeline congestion. Pourbaix adds that although he remains "confident" new pipeline capacity will eventually be added, shipping product to the Gulf Coast will improve the selling price for the company's diluted bitumen.
While most of Canada's crude exports end up in the Midwest, the USGC is a much bigger market for heavy sour crude, where pricing is typically only a few dollars less than WTI. The region traditionally sourced its heavy oil from Venezuela and Mexico, but has been facing steep declines in recent years.
Cenovus says shipping by rail from Alberta to the USGC is expected to cost just under US$20 a barrel, although exact terms of its agreements with CN and CP were not disclosed. The company produces about 375,000 bbl/day of bitumen at its Christina Lake and Foster Creek in-situ operations in Alberta.
According to the National Energy Board, exports of Canadian crude to the US hit a record 207,000 bbl/day in July. Total railcar loadings in Canada, including crude and fuel oils, was estimated at 378,000 bbl/day, also a record high.