Cenovus CEO says company keen to send crude to Saint John for export
By The Canadian Press - Thursday, February 14, 2013 - 0 Comments
CALGARY – Cenovus Energy Inc. is keen on a TransCanada Corp. proposal to ship…
CALGARY – Cenovus Energy Inc. is keen on a TransCanada Corp. proposal to ship crude eastward, especially if the pipeline stretches all the way to the Atlantic Ocean, the CEO of the Calgary-based oil company said Thursday.
“We would be interested in going all the way to Saint John,” Brian Ferguson said in an interview.
TransCanada (TSX:TRP) says it’s economically and technically feasible to convert a portion of its part-empty natural gas mainline to oil service. That line stops at the Quebec-Vermont border, so new pipe would have to be built to connect to Saint John, home to Canada’s largest oil refinery and a large deep-water port.
TransCanada aims to formally gauge shipper interest in an open season later this year. Don Swystun, executive vice-president of refining, marketing, transportation and development, said Cenovus (TSX:CVE) intends to take part.
“We believe it is very important for the country… to move volumes to export off the east coast as well as to Quebec for refineries there,” Swystun said on a conference call with analysts.
The TransCanada pipeline could ship between 500,000 and one million barrels of crude per day.
Cenovus is less interested in feeding the Irving Oil refinery in Saint John than it is accessing tidewater, so that crude can be sent by tankers to lucrative markets around the world.
Currently, the crude Cenovus and its peers produce is landlocked. Burgeoning supplies have led to a glut, depressing its price against other benchmarks. Accessing global markets is seen as a key solution to easing those bottlenecks.
“The capacity of the pipeline is far in excess of the Irving refinery size so the key is to get to a deep water port and be able to put production onto tankers and acess international markets,” said Ferguson.
“There would certainly be volumes that would go to the Irving refinery, but it would be an export point.”
Ferguson said Cenovus foresees being able to move both its oilsands and light crude east.
“The plan is to be able to access tidewater and tankers and move volumes either down to the U.S. Gulf Coast or to Asia or to Europe from Saint John.”
On the call, Ferguson said Cenovus can “power through” its new oilsands projects even though the company, like most Alberta crude producers, is getting a steep discount for its oil.
Operating costs at its oilsands operations are low enough that it can turn a good profit even if the differential — the price gap between heavy Alberta crude and the U.S. benchmark — persists.
The differential between Western Canada Select, the Canadian heavy benchmark, and West Texas Intermediate, the U.S. light benchmark, averaged US$30.37 per barrel in December, compared to US$11.72 a year earlier.
A lower WCS price is not unusual, given the fact that it’s of lower quality and further away from market. But with the differential stretching as wide as US$40 in recent months, there have been concerns about future growth in the oilpatch and what that means for government royalty and tax revenues.
The differential for March is narrower, at around US$26.
Cenovus is also an “integrated” company, meaning that in addition to drawing oil out of the ground, it has interests in refineries that process the crude into higher-value fuel products.
When those refineries are fed with cheaper oil, their costs go down, essentially offsetting the damage the lower prices do to the upstream, or production, side of the business.
Cenovus says it takes a “portfolio” approach to getting its product to market.
The fate of TransCanada Corp.’s (TSX:TRP) Keystone XL pipeline, connecting Alberta crude to the heavy oil-thirsty U.S. Gulf Coast, is currently in the hands of new Secretary of State John Kerry. The project is the target of fierce environmental opposition, and it’s not clear whether the Obama administration is willing to anger elements of its Democratic base and allow the pipeline to go ahead.
“We are in no way betting all of our eggs in one basket on Keystone XL,” said Ferguson.
Proposals to get Alberta crude to the west coast for export to Asia, such as Enbridge Inc.’s Northern Gateway and Kinder Morgan’s Trans Mountain expansion, are also far from certain, amid environmental concerns within British Columbia.
Swystun said about 40,000 barrels of per day of Cenovus production can access tidewater.
About 11,500 Cenovus barrels flow along the existing 300,000 Trans Mountain pipeline to the B.C. Lower Mainland and Washington State. A small fraction of that goes to Asia.
Another 20,000 travel to the Gulf Coast through ExxonMobil’s Pegasus pipeline.
Some 6,000 barrels a day move by rail, and Cenovus sees that growing to 10,000 this year. Small volumes are also moving by barge through third-party agreements.
Between Northern Gateway and the Trans Mountain expansion, Cenovus has committed to ship 175,000 barrels of oil per day to the west coast.
It has signed up to ship another 150,000 barrels per day to the Gulf between Keystone XL and Enbridge Gulf Coast access projects.
Earlier Thursday, Cenovus said it recorded net and operating losses in the fourth quarter as well as an 18 per cent drop in cash flow compared with the year-earlier period.
The company had a net loss of $118 million or 16 cents per share, a big turnaround from the year-earlier profit of $266 million or 35 cents per share.
It also had an operating loss of $189 million or 25 cents per share, compared with the profit of $332 million or 44 cents per share in the fourth quarter of 2011.
Cash flow fell to $697 million or 92 cents per share, down from $851 million or $1.12 per share.
Cenovus shares fell 2.5 per cent to $31.79 on the Toronto Stock Exchange.
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Enbridge to build and operate Gulf of Mexico pipeline for undisclosed price tag
By The Canadian Press - Tuesday, November 6, 2012 at 9:40 PM - 0 Comments
CALGARY – Enbridge Inc. (TSX:ENB) says it will build, own and operate a deepwater…
CALGARY – Enbridge Inc. (TSX:ENB) says it will build, own and operate a deepwater crude oil pipeline in the Gulf of Mexico, but did not provide a price tag for the project.
The Calgary-based company said the pipeline would connect the proposed Heidelberg development, operated by Anadarko Petroleum Corp., to an existing pipeline that it did not name.
The new pipeline is expected to be operational by 2016, but is subject to finalization of an agreement with Anadarko and its project co-owners.
The Heidelberg pipeline will originate in Green Canyon Block 860, southwest of New Orleans and will be in 5,300 feet of water.
“We are pleased to be working with Anadarko and the Heidelberg producers,” said Leon Zupan, Enbridge president of gas pipelines.
“The Heidelberg lateral pipeline is an attractive investment opportunity for Enbridge. It also furthers our objective of diversifying our offshore business to include facilities that support the substantial crude oil discoveries in the deepwater of the US Gulf Coast.”
Enbridge’s offshore pipelines transport approximately 40 per cent of the natural gas produced in the deepwater Gulf of Mexico.
The company’s offshore assets include interests in 13 natural gas pipelines and one crude oil pipeline in five major pipeline corridors off the coasts of Louisiana and Mississippi.
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Oil rides the rails
By macleans.ca - Thursday, October 4, 2012 at 7:10 PM - 0 Comments
Train delivery is proving to be more flexible than pipelines for crude
Fraught with lengthy construction timelines, environmental scrutiny and bottlenecks, oil pipelines are beginning to take a back seat among producers to a more flexible and old-fashioned delivery system: railways.
“It is rail that is proving to be the viable alternative and the flexible solution to oil pipelines,” says Jason Konzuk, an oil and gas analyst with Dundee Capital Markets. “And this trend will continue for a while.” In a recent report, Konzuk said that U.S. petroleum rail carloads increased by 64 per cent over the past year thanks to the Bakken oil play in North Dakota. In Canada, where the fates of the Keystone XL and Northern Gateway pipelines—needed to move crude from the oilsands south to U.S. markets and West to Chinese markets, via British Columbia—are still up in the air, rail carloads increased by 29 per cent over the same period.
Though rail is more costly per barrel than pipelines, producers are finding it makes economic sense to invest in the infrastructure to load and off-load railway shipments. The rising volume of heavy oil produced in Western Canada is clogging up existing pipeline capacity. That is creating a sizable price gap between Western Canadian crude prices and other crude grades worldwide. Western Canadian heavy oil, for instance, is selling for between $15 and $40 less per barrel than a comparable grade found in Mexico, a discount large enough for producers to justify the $4 to $10 per barrel extra it costs to ship to their refineries via rail rather than pipeline. Producers in turn get increased market flexibility and shorter delivery times.
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Enbridge has a best friend in Ottawa
By Chris Sorensen - Wednesday, July 4, 2012 at 8:20 AM - 0 Comments
Canada’s largest transporter of crude oil allies with the capital, whether it wants it or not
Jimmy Jeong
Patrick Daniel started in the oil and gas pipeline business more than 30 years ago. At the time, pumping oil through thousands of kilometres of buried metal pipes was viewed as a relatively innocuous activity, to the extent it was even thought about at all. “It was generally considered to be dull, boring and well below the radar screen,” says Daniel, the chief executive of Calgary’s Enbridge Inc., now the country’s largest transporter of crude oil. “It provided an essential service to society and was something that most everyone took for granted.”
Not anymore. Enbridge now occupies ground zero in the raging debate over Alberta’s vast oil sands. The company’s proposed $5.5-billion Northern Gateway project, a pipeline running 1,177 km from near Edmonton to a shipping terminal in Kitimat, B.C., is badly needed to deliver the gooey bitumen to energy-hungry Asian markets. But activists who protest the oil sands’ heavy carbon footprint have seized on the project as a way to choke off further development in northern Alberta. They’ve joined forces with local environmentalists and First Nations groups along the Northern Gateway’s proposed route, and are seeking to have the pipeline killed. A similar strategy was successfully used to throw up a roadblock in front of rival TransCanada Corp.’s Keystone XL project, which was supposed to deliver oil sands crude to the U.S. Gulf Coast.
Fortunately for Enbridge and its shareholders, the company has found itself with a powerful new ally in recent months: Ottawa. Prime Minister Stephen Harper has made oil sands exports and greater ties with Asia a key economic focus, and his government appears to be doing whatever it can to make sure the Northern Gateway gets built. That includes reminding Canadians the pipeline is in the country’s “national interest,” passing key legislative changes that could be used to dramatically speed up the pipeline’s approval and launching direct attacks on groups opposing the project—even going so far as to name some a “terrorist threat.”
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Rockets and feathers
By Aaron Wherry - Friday, May 13, 2011 at 10:00 AM - 11 Comments
Mike Moffatt explains why another investigation into gas prices isn’t likely to solve anything.
The gasoline market tends to exhibit a behaviour known as “rockets and feathers,” where prices are quick to rise (they rocket up) but are slow to fall (like a feather). The best explanation to why this occurs is from research by economist Matthew Lewis at Ohio State University. When the price of crude oil rises, gas stations must keep pace with those increases or else they will be selling gasoline below cost, since margins in retail gasoline are so low.
But why does this not also occur when oil prices fall? When crude oil prices are falling gas stations will initially offer a small cut in gasoline prices. Consumers are grateful for the falling prices and feel that they are getting a deal. This causes consumers to cut down on their comparison shopping for gasoline. Since fewer consumers are looking for the cheapest station at which to buy gas, this slows down the pressure for stations to lower prices.
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Dictatorship oil
By Aaron Wherry - Tuesday, January 11, 2011 at 2:07 PM - 64 Comments
First, a correction. The list of oil sources posted here should have read: Algeria, the United Kingdom, Norway, Saudi Arabia, Nigeria, Angola, Iraq, Mexico, Venezuela, Russia and the United States. You’ll note that, in the original post, Iran was listed where Angola should have been. My apologies to to the good people of Angola.
Meanwhile, Ezra Levant, seemingly the inspiration for the government’s new rhetoric, continues to draw a line between good oil and bad oil: the former including our crude, the latter including crude from suppliers such as Saudi Arabia, Nigeria, Venezuela, Algeria. In total, those four nations account for about 40% of our oil imports.
