Calgary’s Cenovus Energy says it has signed three-year agreements with major rail companies to ship about 100,000 b/d of heavy crude from Alberta to the US Gulf Coast. Company photo.

Cenovus says rail strategy will mitigate the price impact of pipeline congestion

Cenovus Energy says it has signed three-year deals with major rail companies to transport approximately 100,000 barrels per day (b/d) of heavy crude oil from northern Alberta to various destinations on the US Gulf Coast.

According to the Calgary-based company, the agreements entail transporting oil with CN from Cenovus’s Bruderheim Energy Terminal starting in the fourth quarter of 2018, and with CP through USD Partners’ terminal in Hardisty starting in the second quarter of next year.  Both contracts will ramp 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 & Chief Executive Officer.

“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 company says the agreements not only involve 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 says it 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 favourable.