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MEG skirts congested pipelines
Thermal oil sands producer MEG Energy is turning to rail to get around pipeline bottlenecks and deliver its crude to U.S. Midwest refineries.
The Alberta producer said it loaded six trains, each with a capacity of about 60,000 barrels, at an Alberta terminal in January after making its first rail delivery in December.
The volumes were destined for two refineries — BP’s Whiting facility in Indiana and Citgo’s plant in Lemont, Ill. Both plants have recently been modified to process heavier crudes.
MEG completed work in December on a 900,000 barrel bitumen storage facility at the Alberta terminal and found the plant was filled to capacity within a month, said company President Bill McCaffery. The storage gives it a chance to hold crude until prices improve.
Barges also used He said MEG is also using barges, which he described as the “workhorse of the Mississippi,” to deliver diluted bitumen.
Last summer, MEG used 18 leased barges for shipments on the U.S. inland waterway system, with each board capable of carrying up to 30,000 barrels.
But the company is also working to secure new pipeline capacity, securing space for the summer launch of Enbridge’s 600,000 barrels per day Flanagan South pipeline connecting Cushing, Okla., with the U.S. Gulf Coast, but it has yet to book any space on TransCanada’s 700,000 bpd Gulf Coast pipe from Cushing to Nederland, Texas.
McCaffery told analysts earlier in February that “our oil marketing strategy is a key part of our long-term plan. 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.”
How much crude MEG will move by rail in future months will depend on where the best-paying markets are located.
Oil sands giant Suncor said earlier in February that its 137,000 bpd Montreal refinery is receiving about 30,000 bpd by rail, while Imperial Oil and shipper Kinder Morgan are building a crude-by-rail terminal in Edmonton that is expected onstream next year at 100,000 bpd.
MEG is aiming to produce 80,000 bpd by 2015, after averaging 42,251 bpd in the final quarter of 2013, an increase of 10,000 bpd from a year earlier, and ramping up to 55,000 bpd in January.
—Gary Park
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