Canada's Cenovus signs rail deals to transport oil to US Gulf Coast

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An oil pump jack near Drayton Valley, Alberta.
Cenovus Energy Inc.
CALGARY, Alberta – Cenovus Energy Inc. has signed three-year deals with major rail companies to transport approximately 100,000 barrels per day of heavy crude oil from northern Alberta to various destinations on the U.S. Gulf Coast. The agreements involve moving oil with Canadian National from Cenovus’s Bruderheim Energy Terminal starting in the fourth quarter of 2018, and with Canadian Pacific through USD Partners’ terminal in Hardisty, Alberta starting in the second quarter of next year, both ramping up through 2019.

“Moving crude by rail is part of a portfolio approach we take to transporting our product to market,” said Alex Pourbaix, Cenovus president and CEO. “Our rail strategy provides a means of mitigating the price impact of pipeline congestion. While we remain confident new pipeline capacity will be constructed, these rail agreements will help get our oil to higher-price markets.”

The plan involves not only the freight and loading components but also rail car leasing, offloading logistics, marketing and other arrangements. The specifications of the cars Cenovus is leasing meet or exceed all applicable current and announced regulatory requirements. The company is expecting all-in costs to transport the oil from Alberta to the Gulf Coast in the mid to high teens (U.S. dollars), consistent with prior estimates. Exact commercial details of the agreements are confidential.

Cenovus continues discussions about expanding the oil-by-rail agreements to move additional volumes if the terms are favorable.

–From a Cenovus Energy Inc. press release

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