Canexus Corp's Alberta crude-by-rail terminal loses deal after delay

Thu Oct 23, 2014 6:50pm EDT
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By Nia Williams

CALGARY, Alberta Oct 23 (Reuters) - Terminal operator Canexus Corp said on Thursday an unnamed midstream company cancelled its contract to ship two unit trains per week from Western Canada's first dedicated crude-by-rail facility.

Canexus did not name the company, which signed a take-or-pay agreement in December 2013, and said the contract was cancelled after delays in connecting the crude-by-rail terminal to the Cold Lake pipeline system.

"We are very disappointed that the delay in the tie-in of the Cold Lake pipeline system to the unit train facility triggered the termination right under this agreement," said Doug Wonnacott, Canexus' president and chief executive officer.

The Bruderheim terminal near Edmonton, Alberta, was planned as a 70,000 barrel-per-day facility but as a result only has contracted volumes for up to four units trains per week, roughly 40 percent of its capacity. In a unit train, all of the cars travel from the same origin to the same destination.

It is the latest set-back for the troubled Bruderheim terminal, which was put up for sale over the summer.

Canexus was the first company to ship mile-long unit trains loaded with crude from Western Canada to markets in the United States but the project was dogged by delays and costs spiralled.

Under the terms of Canexus' contract with the midstream company, Bruderheim was meant to be connected to the Cold Lake system, Inter Pipeline Fund's 450,000 bpd oil sands network, by Sept. 1.

But in August MEG Energy refused to allow Canexus to do the work needed to tie the Cold Lake system into a key feeder pipeline running from MEG's Stonefell terminal to Bruderheim.   Continued...