Dan Healing, With files from The Canadian Press
Published: Friday, February 07 2014
Thermal oilsands producer MEG Energy Corp. has ramped up rail shipments of diluted bitumen from Bruderheim to 11,000 barrels per day, as the company looks to skirt pipeline bottlenecks.
President and chief executive Bill McCaffrey said the company loaded and sent to market six unit trains carrying 60,000 barrels of diluted bitumen (about 40,000 bitumen, 20,000 diluent) each in January, the first full month it has had wellhead-to-terminalto-unit train access for its products.
"Our marketing strategy is a key point of our long-term plan," he said. "We're looking at a full value chain that includes a constant focus on higher production volumes produced at the lowest cost and sold at the highest prices."
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He said the bitumen is being shipped with diluent to allow it to flow in a pipeline from its source 150 kilometres south of Fort McMurray to Bruderheim, but the company plans to install equipment to extract the diluent there and return it as it's not needed for rail shipment.
Pipeline bottlenecks and lower demand due to refinery outages depressed prices paid for Western Canada Select blended heavy oil in the fourth quarter, driving the discount paid versus New York-traded West Texas Intermediate to an average of $32.20 US per barrel, almost double norms. MEG noted realized prices of $38.22 Cdn per barrel in the fourth quarter, versus $45.67 a year earlier.
During the period, MEG commissioned its 900,000-barrel Stonefell storage terminal and completed its pipeline connection to the Canexus Corp. rail-loading facility at Bruderheim.
How much crude MEG moves by rail in future months will depend on where the best-paying markets are, McCaffrey told analysts.
"Every month, we have discussions with refiners - they want to buy crude, we want to sell crude," he said. Once the company determines where it can get the best price, "that's where we'll point those trains."
The company pointed out that while fourth quarter production levels were up 31 per cent from the same period in 2012, sales volumes increased only 10 per cent due to 6,300 bpd of production being placed in storage or used as line fill. Financial results missed expectations as a result of the unsold oil, plus high heavy oil discounts.