Nustar Energy deal gives CP another foothold in oil sector
Canadian Pacific has again grown its ability to ship oil from Saskatchewan, moving crude from Lloydminster for Nustar Energy and planning to expand this year.
The Calgary-based railway has seen a faster-thanexpected increase in the demand for moving oil on rail, and in December said it would build a facility in Estevan to ship from the prolific Bakken formation.
“This new facility and the planned expansion in 2012 represent an exciting growth opportunity for CP’S energy portfolio,” Tracy Robinson, CP’S vice-president of energy and merchandise, said in a release.
CP will leverage its north main line infrastructure to accommodate the new Lloydminster transload facility, calling it a “key enhancement” to its energy portfolio which will meet Nustar’s initial shipping needs.
Further expansion is planned for the facility, operated by Torq Transloading, this year. It will ship to Nustar terminals in the northeast U.S. and the Gulf Coast.
“We believe that moving undiluted heavy Canadian crude by rail to coastal markets is an economically viable solution that brings added value to the end users, as well as the producers in Canada,” Nustar CEO Curt Anastasio stated.
Shipping crude has been a growth area for CP.
The carrier has seen the number of carloads from the North Dakota Bakken increase from 500 to 13,000 over the past two years, with expectations that could climb to 70,000 down the road, with projected revenue of $140 million.
Last fall it reported its carloads from the Bakken were up 50 per cent over what was anticipated in June.
As pipeline capacity is stretched, rail becomes an increasingly viable option.
Bloomberg reported earlier this week that Petrobakken is shipping crude by rail this month because of limited space on the Spearhead pipeline, which runs from Chicago to Cushing, Okla.
Late last year, Cenovus Energy said it was shipping oil from Estevan by rail every 20 to 35 days.
CP is under pressure from its largest shareholder to replace the CEO and accelerate improved operating efficiency.
Bill Ackman, whose Pershing Square owns 14.2 per cent of the company, is hosting a meeting for investors Monday to introduce his choice for CEO, retired Canadian National CEO Hunter Harrison, along with five proposed board members.
He believes Harrison can improve CP’S operating ratio, a key measure of efficiency, faster than the railway is pledging.
Over the next two weeks, CP board members and CEO Fred Green will meet with investors to present their multi-year plan and the gains they say have already been made.