Cenovus Energy Inc. (CVE) says it’s selling Canadian oil sands crude near world prices by exporting through Vancouver’s port as Canada’s fourth-largest oil producer by market value lines up buyers ahead of a surge in production.
The company is selling “small” volumes of Western Canada Select blend to buyers in markets such as Asia and California to help them understand how to refine it, said Paul Reimer, senior vice president of marketing, transportation and power, in an interview yesterday at the company’s Calgary headquarters.
“WCS is our Bordeaux blend,” said Reimer in a reference to the French blended wine. “People like our crude and are prepared to pay international prices for it.”
Prices for the Canadian crude sold through Vancouver are closer to those paid for oil from Dubai and for Brent, the benchmark used in Europe, and at a premium to West Texas Intermediate, he said, without providing specific figures. WCS has been selling at a steep discount to WTI in the U.S. market.
Cenovus plans to expand production at its oil sands operations in northern Alberta to 400,000 barrels a day by 2021 from 82,000 in the first quarter. The company is counting on proposed new pipelines, including Enbridge Inc.’s Northern Gateway to Canada’s Pacific coast and TransCanada Corp.’s Keystone XL route to the U.S. Gulf Coast, to help it attract new buyers and higher prices, Reimer said.
Western Canada Select traded at $57.27 a barrel, a discount of $30 a barrel to West Texas Intermediate, the U.S. benchmark, at 9:06 a.m. today. WTI fell 0.2 percent to $87.48 at 11:26 a.m. on the New York Mercantile Exchange, while Brent rose 1.3 percent to $101.09 in London.
The company is currently shipping about 11,000 barrels a day to Vancouver on Kinder Morgan Inc.’s Trans-Mountain pipeline. The oil is then sold at the port to international shippers, Reimer said.
Cenovus is also shipping almost 5,000 barrels a day of oil by rail to move oil to the Gulf Coast where the company also captures higher prices, Reimer said. The company is also shipping unspecified amounts of oil to the East coast, Reimer said without providing details.
“Our market development is all about trying to sell to different counterparties so that we understand what the different markets are going to do for us,” he said. “In time, when there’s full volume, we’ll sell to anybody at the highest price.”
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