September 17, 2018 / 1:27 AM / 3 months ago

USD Partners moving ahead with Canada crude by rail expansion

(Reuters) - USD Partners LP has begun expansion work at one of Canada’s largest crude by rail loading terminals, which will boost capacity at the facility by 50 percent and be completed by year end, the head of the company’s Canada unit told Reuters.

The expansion at Hardisty, Alberta, will increase loading capacity to three 120-car unit trains per day, or roughly 225,000 barrels, to meet strong demand from both producers and refinery customers amid pipeline bottlenecks, said Jim Albertson, senior vice president, Canadian Business Unit, for parent USD Group.

The group operates a network of oil and fuel loading, unloading and storage terminals across North America.

“We have started the process of expanding the (Hardisty) terminal by the equivalent of one train a day. That is planned to be, by the year end, in commission,” he said in an interview on Friday, declining to say how much the expansion would cost.

The terminal currently has loading capacity for two 120-car unit trains per day.

The expansion comes at time when new pipeline projects are facing long delays and the discount on Canadian oil has widened to its biggest spread in nearly five years.

Canada’s crude by rail exports hit a record of nearly 205,000 barrels per day (bpd) in June as rising oil production in Western Canada has outstripped pipeline capacity. Exports are expected to top 300,000 bpd by year-end and continue rising in 2019 as producers and railways sign transport deals.

Houston-based USD’s plan will add a second set of loading arms and a new inside loop, allowing trains to be loaded from both sides of the existing rack at once, Albertson said.

Loading terminals are needed to get the oil onto the trains.

USD Partners said last month that it was “evaluating a potential expansion” at Hardisty, a major Canadian oil hub northeast of Calgary, due to strong customer demand, but it has not previously confirmed the project was moving ahead.

Albertson said that partner Gibson Energy Inc will be ready to flow higher volumes of oil to the facility by year-end and that railway operator Canadian Pacific Railway Ltd is also on board, though the shift to three trains per day will not be immediate.

“The ramp-up will be very gradual in the first quarter (of 2019), which will allow us to make sure that everything is seamless on the loading and outbound operations,” said Albertson.

A spokesman for Gibson declined to comment on the project status but said the company would be ready to supply increased volumes of crude as soon as needed.

A spokesman for CP said the railway is committed to ensuring that any new volume tendered for shipment on the railway, whether oil or other commodities, are supported through close alignment with its operations and network capacity.

Reuters reported this month that major oil producer Cenovus Energy Inc had signed a deal with Canadian National Railway Co to move more crude by rail.

USD canceled a previous planned expansion at Hardisty in 2016, which would have doubled capacity to four unit trains per day. That expansion would have required major new infrastructure and a federal environmental review.

($1 = 1.3034 Canadian dollars)

Reporting by Julie Gordon in Vancouver; editing by Jonathan Oatis

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