| CALGARY, Alberta, April 23
CALGARY, Alberta, April 23 The handful of firms
racing to build oil train terminals in Western Canada should be
rejoicing over the latest delay to TransCanada's Keystone XL oil
pipeline, but many have troubles of their own.
Companies including Canexus Corp and Gibson Energy
Inc are building terminals that will pump Western
Canadian crude on to mile-long trains bound for U.S. refiners.
In theory, these firms have the most to benefit from a
months-long delay in U.S. approval to the 1,200 mile (1,900 km)
pipeline that would link Canadian oil fields to refiners on the
U.S. Gulf coast.
Canexus, Gibson Energy, whose shares hit an all-time high on
Tuesday, and others have moved over the past two years to
position themselves as the quicker, although costlier, option
for shipping Canadian crude across North America.
But many are struggling to get their terminals up and
running due to chronic labor shortages in Alberta, a harsh
winter and cost overruns. That means they may not be able to
fully exploit the growing shortage of pipeline capacity, as they
To be sure, some like Ceres Global Ag Corp are
seeking to press their advantage after Washington said on Friday
it would postpone a final decision on the Keystone XL line,
likely until after U.S. congressional elections in November.
While the firm's first crude terminal, a 25,000 bpd facility
in Northgate, Saskatchewan, is nearly a year behind schedule, it
hopes the Keystone news will flush out future customers that
could support its eventual expansion to 70,000 bpd.
"Our sales team will be out in Calgary next week and we will
be testing that," Michael Detlefsen, president and chief
executive officer, told Reuters. "The prospective pipeline
delays present a three- to five-year window in which oil-by-rail
could provide a reasonable alternative to the pipelines."
With Western Canadian production expected to more than
double to 6.6 million bpd by 2030, producers are desperately
seeking alternatives to congested export pipelines.
An estimated 1.1 million bpd of rail-terminal capacity will
be available in Western Canada by year's end, but much of that
will depend on already-delayed terminal projects sticking to
With much of the industry struggling to execute existing
projects, industry sources see little opportunity for midstream
companies to take full advantage of the Keystone delay.
Canexus Corp, a chemical manufacturing and
transloading company, originally planned to be shipping 50,000
bpd of crude by November but in March was only loading 12 to 15
unit trains per month, roughly 24,000 bpd. Its Bruderheim,
Alberta, facility is also scheduled to be shut down for up to 90
days from June to finish construction work.
Canexus did not respond to requests for comment.
Its shares are down nearly 25 percent since the start of
2014 following huge cost overruns on the Bruderheim terminal and
the departure of chief executive officer Gary Kubera. But they
have risen 6 percent since Friday's news.
Privately owned TORQ Transloading Inc's 168,000 bpd
Kerrobert, Saskatchewan, terminal will be more than a year
overdue, and Gibson's 120,000 bpd Hardisty, Alberta, unit train
terminal has missed its first quarter 2014 start date by several
TORQ did not respond to requests for comment, while Gibson
declined to comment.
One other contingent of Canadian oil companies is poised to
take advantage of Keystone's delay: some of Alberta's smaller
producers, having lost out to bigger players in the race to sign
up for major new pipeline projects, were among the first to
start transporting oil cargoes by rail.
These smaller firms, which do not produce enough crude to
fill dedicated oil trains carrying around 50,000-70,000 barrels,
continue to load their crude on to manifest trains, which carry
mixed cargoes, even though the economics are not as attractive.
Oil sands giants such as Cenovus Energy Inc are
also loading at manifest terminals but are keen to wring more
value from rail shipments by using oil trains.
Connacher Oil and Gas Ltd started moving crude by
rail four years ago to avoid the risk of pipeline outages. It
now ships up to 90 percent of its 13,000 bpd of production via
"I sit back and am pleased we have been in rail for this
long, but I'm also pleased we're not getting into it today,"
said Jesse Beaudry, Connacher vice president of marketing and
"A lot of companies have already established themselves in
the best terminals, and if you want to get into those you have
to pay incrementally more."
(Editing by Jonathan Leff and Ross Colviin)