* Bruderheim terminal will ship 100,000 bpd by Q3 2014
* MEG Energy and Cenovus Energy have signed up as shippers
* Terminal could ship raw bitumen in the future
By Nia Williams
CALGARY, Alberta, Oct 3 Western Canada's first
crude-by-rail unit train terminal is set to start transporting
50,000 barrels per day of oil sands crude to the U.S. market
next month, the CEO of operating company Canexus said.
The terminal in Bruderheim, Alberta, which will be expanded
to 100,000 bpd by the second half of next year as a second
supply pipeline is connected, initially will load only "dilbit"
oil, or heavy bitumen crude from Canada's oil sands region mixed
with 30 percent light condensate, Gary Kubera, chief executive
of privately owned Canexus, said in an interview.
The facility is the first of a half dozen or so Canadian
projects that have emerged over the past year to help carry more
of the booming production from the Alberta oil sands by rail as
producers seek alternatives to congested export pipelines.
Shipping by rail is more costly, but also more flexible.
At present, the oil sands are only served by manifest trains
hauling smaller loads, a less cost-effective mode of transport,
but around 550,000 bpd of unit-train crude-by-rail projects -
terminals that can load up to 120 rail cars a day - are due to
start up in Western Canada by the end of 2014.
The Canexus terminal, which has been shipping 25,000 to
30,000 bpd of crude from Bruderheim on manifest trains since
2012, has already secured customer commitments for about 35
percent of its capacity. The company expects 70 to 80 percent of
capacity to be under contract by the end of the year.
"The first unit train is set to run by the end of November,"
"We expect unit trains will be going to the East, West, Gulf
coasts. There is a lot of investment going into refineries to
allow them to move crude by rail."
He declined to give exact details of where Bruderheim
shipments will go in the United States, saying it would be the
decision of the shippers and their customers.
Extra rail capacity could help limit discounts on
bottle-necked oil sands crude, which widened to as much as $40
per barrel below the West Texas Intermediate benchmark earlier
this year, cleaving a hefty chunk out of producers' profits.
Canadian producer MEG Energy says the terminal
allows MEG to ship all of its 30,000 to 35,000 bpd of production
by rail to its main market in the U.S. Midwest, as well as the
Gulf Coast and Eastern Canada.
"With the massive rail network on the continent it could be
to any potential refinery that has interest in that feedstock
and has offloading facilities," spokesman Brad Bellows said. "We
have seen a lot of interest, particularly from the Gulf Coast."
The initial supply pipeline into Bruderheim will run from
MEG's newly operational, 900,000-barrel Stonefell storage
terminal, with other producers also able to move crude through
Cenovus Energy Inc is also signed up as a shipper
from Bruderheim, which is served by Canadian Pacific and
Canadian National railways.
Cenovus will start moving its Cold Lake crude blend from the
terminal once the second supply pipeline is connected to its
projects in northern Alberta next year, and once its own heated
and coiled rail cars are delivered in the latter part of 2014.
"We are targeting moving about 30,000 bpd of our oil
production by rail by the end of 2014," a Cenovus spokeswoman
said. "That will be through the Bruderheim terminal, with some
also coming from Saskatchewan and southern Alberta."
The unit trains at Bruderheim will use heated and coiled
rail cars even for dilbit to prevent it becoming more viscous in
bitterly cold Canadian winter temperatures.
Heated and coiled cars are essential for transporting raw
bitumen, which Kubera said the terminal could eventually start
shipping depending on demand, in a move that should boost
profits for producers.
"We think in the long term that is the one model that will
allow crude by rail to compete with pipelines. Raw bitumen or
near-raw bitumen is the better option for crude by rail," he
Pipelines are currently seen as the cheapest method of
transporting crude oil but Canadian producers have to dilute
their tar-like bitumen with around 30 percent condensate in each
barrel - which is more expensive than crude - to allow it to
flow through pipes.
Recent research by Sandy Fielden, analyst at consultants RBN
Energy, suggested moving raw bitumen on unit trains from Alberta
to the Gulf Coast offers a greater netback, $65 per barrel,
compared with $51.27 per barrel for shipping dilbit via
At the moment, however, the heating equipment needed to load
and unload raw bitumen from unit trains is absent from terminals
and refineries across North America.
"Our analysis indicates that rail can beat the pipelines but
that the infrastructure to achieve the necessary economies of
scale are not yet in place," Fielden wrote in a note.