Keystone XL a ‘political football,’ Cenovus boss says
Alternative transportation options exist if pipeline fails to win approval: Ferguson
One of the first questions out of the gate during a quarterly conference call with analysts hosted by Cenovus Energy Inc. this morning struck an ominous tone. What happens if Keystone XL isn’t built? There was a pause before Brian Ferguson, the Calgary firm’s chief executive, answered.
“We read all the same headlines you guys are reading,” he said, describing the pipeline uproar – which has expanded from sit-ins on Capitol Hill to include Congressional demands for an independent investigation into the relationship between TransCanada lobbyists and State Department officials – as a “political football.” He then suggested concern over American jobs and energy security would ultimately triumph over any opposition: “Ultimately that logic will prevail.”
Even so, Ferguson indicated production from Christina Lake and Foster Creek – up 14 per cent compared to this time last year – is far from wholly dependent on construction of the Gulf Coast pipeline. “There are a number of alternatives,” he told analysts. “We’re making sure we don’t have all our eggs in one basket.”
Cenovus senior vice-president of refining and marketing Don Swystun was more explicit. “Shipping by rail is an option for us,” he noted.
That echoes comments by Canadian Pacific chief executive Fred Green, whose company appears poised to capitalize on growing oil production in the American Midwest from plays like the Bakken. Even capturing five to 10 per cent of crude volumes currently shipped by pipeline would represent “a major opportunity for us as a railway,” Green told the Calgary Herald this week.
Swystun noted that Cenovus plans to book firm capacity on Kinder Morgan’s Trans Mountain Pipeline to Burnaby, British Columbia, which would open up markets in California and, potentially, Asia-Pacific countries. (An application to convert a portion of the half-century-old line to firm service is still before the National Energy Board).
More immediately, Cenovus plans to commission a $3.8-billion expansion at its Wood River refinery, which will boost gross coking capacity there by 65,000 barrels per day. Together with the company’s Borger refinery in Texas, the coking expansion will bring total heavy oil processing capacity to 275,000 barrels per day. “I think that covers us off for a period of time,” Swystun said.
The expansion also stands to benefit in the absence of Keystone, boosting operating cash flows by a projected $300 million. So long as refining margins remain strong thanks to excess crude sloshing around in the U.S. Midwest, Swystun predicted the coking addition at Wood River would make the facility “one of the most profitable refineries in North America.”