Canada oil tanks may be hidden gem in JPMorgan's commodity sale

Fri Aug 23, 2013 11:35am EDT
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By Nia Williams

CALGARY, Alberta Aug 23 (Reuters) - As Wall Street giant JPMorgan Chase & Co begins the search for buyers of its physical commodities business, a collection of long-term leases on more than a quarter of the oil storage tanks in Canada's primary trading hub may emerge as one of its most valuable but lesser-known assets.

Despite growing signs of a downturn in global rates for leasing oil storage capacity, the opportunity to take up over 6 million barrels in Hardisty, Alberta, may be a powerful attraction, say crude traders in Canada's oil capital Calgary.

For any company serious about staking a claim to the fast-expanding physical oil sands market, the tanks - owned by pipeline company Enbridge Inc, according to market sources - offer immediate and powerful entree.

For JPMorgan, the storage tanks may be one of its most lucrative offerings. Other assets include the Henry Bath & Sons metals warehouses, which are the subject of intensifying regulatory scrutiny and several class action lawsuits over alleged hoarding of aluminum, and a handful of power plant contracts, many of which have already been sold off.

"For JP it's a tangible asset they will market when they come to sell their commodity business," said one veteran Canadian crude trader in Calgary.

"Storage allows you some flexibility and in this market it's important to have that."

The six million barrels are more than half Enbridge's total capacity of around 11 million barrels at Hardisty, the tiny town in east-central Alberta that is Canada's equivalent to Cushing, the main U.S. crude storage hub in Oklahoma.

It is also about 25 percent of the estimated total capacity in Hardisty, starting point for both TransCanada Corp's proposed 890,000 barrel per day (bpd) Keystone XL and 1.1 million bpd Energy East pipelines. The nearby city of Edmonton, another Alberta trading hub, has around 11 million barrels of storage, according to industry estimates.   Continued...