Oil producer Cenovus Energy announced it has signed crude-by-rail contracts with CN Railway and Canadian Pacific.
The three-year deals cover transportation of approximately 100,000 barrels per day of heavy crude oil from northern Alberta to various destinations on the U.S. Gulf Coast.
The Calgary-based oil sands producer said the agreements involve moving 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, Alberta starting in the second quarter of 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 Chief Executive. “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 also includes 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 per barrel to transport the oil from Alberta to the Gulf Coast in the mid to high teens, in U.S. dollars. Exact details of the agreements were not disclosed.
Cenovus said it is continuing discussions about expanding the oil-by-rail agreements to move additional volumes if the terms are favorable.