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Cenovus Energy spreads market wings
Gary Park For Petroleum News
Cenovus Energy, the oil sands spin-off from Encana that is already flush with excitement over its production gains this year and plans to speed up future stages of its thermal-recovery projects, is now starting to fetch international prices for volumes of its special bitumen blend it is delivering to Asian and California markets.
It says “small” volumes of Western Canada Select, WCS, are giving new refiners a chance to determine whether they can process the crude.
Although Cenovus has not disclosed what it is receiving for WCS, it said crude shipped from Vancouver sells in a range closer to oil from Dubai and Brent, both of them representing a healthy premium over West Texas Intermediate.
Cenovus, which has targeted an increase in its northern Alberta output to 400,000 barrels per day by 2021 from its first quarter 82,000 bpd, is counting heavily on approval of three new export pipelines — Enbridge’s Northern Gateway, Kinder Morgan’s Trans Mountain expansion (for which it is one of nine committed shippers) and TransCanada’s Keystone XL route.
Shipment by pipe, rail Western Canada Select was trading at about $57 per barrel early in July, a discount of $30 to WTI, while Brent was at $100 in London.
Paul Reimer, Cenovus’ senior vice president of marketing, said his company is currently shipping about 11,000 bpd to Vancouver on Trans Mountain, where it is sold to international shippers. Another 5,000 bpd is being delivered by rail to the U.S. Gulf Coast, while unspecified volumes are reaching the East Coast.
He told Bloomberg the company’s market development strategy is to sell to various counterparties to “understand what the different markets are going to do for us. In time, when there’s full volume, we’ll sell to anybody at the highest price.”
Cenovus is also marketing a portion of oil from its Christina Lake project as Christina Dilbit Blend, CDB, which was established in 2011 to handle increased production from an operation targeted at 218,000 bpd gross when three more phases are completed.
CDB is priced at a discount to WCS and has been well-received by refineries. Cenovus anticipated the price differential will narrow as CDB gains acceptance from a wider base of refining customers.
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