MEG expanding waterway transportation

MEG Energy, the Canadian oil sands start-up, now has 18 leased barges available to move its products to the U.S. Gulf Coast along the U.S. Inland Waterway.

It is also counting on connections between its terminal and an Edmonton-area rail loading facility, which is due online later this year, adding to its transportation options.

Company President and Chief Executive Officer Bill McCaffery told analysts that barge and rail can be “independently ramped up or down depending on whether they are accretive to the market price we can achieve using other alternatives.

“So, when combined with our pipeline options, we expect to have the flexibility to optimize market access throughout North America and maximize our netbacks.”

MEG has been steadily building production, averaging 32,144 barrels per day of oil and liquids in the second quarter, compared with 27,826 bpd two years ago, and is in the commissioning phase for its Christina Lake thermal-recovery operation that underpins its hopes of reaching 80,000 bpd by early 2015.

Each barge can carry up to 30,000 barrels and six barges can form each tow along the Mississippi River, McCaffery said.

He said it takes about seven days to barge crude from Cushing, Oklahoma, to the U.S. Gulf Coast and, because the system is well regulated, there is no congestion on the river. McCaffery said demand for Canadian heavy crude in the U.S. Midwest is about 200,000 bpd and MEG plans to serve refineries there as well as the Gulf Coast, plus destinations along the Mississippi.

“Macro changes are taking place in the U.S. crude oil market and we will see a normalization of price differentials,” he said.

“Increased takeaway capacity from Cushing to the Gulf Coast is helping relieve the situation and with work well under way for the southern section of Keystone XL and the Flanagan South pipeline there will be further relief.”

—Gary Park