Cenovus celebrates TMX pipeline start-up

The start-up of the Trans Mountain Pipeline (TMX) put Cenovus Energy in a celebratory mood reporting its firstquarter results.

“This is a great day for Canada, to get this pipeline up and running,” said Cenovus CEO Jon McKenzie during a quarterly conference call on May 1.

“The people of Canada are going to see the benefit for a long period of time in terms of increased taxes and royalties and the like.”

The expansion increases the Trans Mountain system’s shipping capacity from 300,000 barrels per day to 890,000 barrels per day and will help open up new export markets for Canadian oil.

“With this critical piece of infrastructure now complete, we anticipate lightheavy differentials will remain narrow for years, while excess egress capacity exists,” added McKenzie.

The company reports it has tankers ready set to ship Cenovus oil from the TMX in May and expects to make record sales in the second quarter.

“There’s a pretty vast market out there, which is exciting,” said Drew Zieglgansberger, Cenovus’ executive vicepresident strategy and corporate development.

TMX took 13 years to build at a cost of $34 billion and could be the last major oil pipeline to be built in Canada according to McKenzie.

“It is increasingly difficult to build pipelines in this country, and it wouldn’t surprise me if this was the last pipeline,” said McKenzie.

“But the reality is, we have a tremendous resource here in Canada and we produce our oil in my view, more sustainably than probably anywhere else in the world. And if we were in a position where as a nation, we decided to take that to market, we should be building more pipelines.”

Cenovus reported upstream production in the quarter averaged 800,900 barrels of oil equivalent per day (boep/d), up from 779,000 a year earlier, while downstream throughput averaged 655,200 barrels per day, up from 457,900 in the same quarter last year.

Production in the conventional oil segment was 120,700 boep/d in the first quarter, in line with the fourth quarter.

Lloyd thermal production increased in the quarter to over 114,00 barrels per day from 106,000 bbls/d in the prior quarter reflecting higher operating efficiency and improved downhole pump reliability.

It was the highest quarterly average in the history of the asset, generating a question about how sustainable that is.

“It’s currently producing at a rate that would be higher than where we would have budgeted this year, but it’s been there for some period of time,” replied McKenzie.

“And the subsurface people, together with the operating people just continue to find opportunities to debottleneck to drill wells differently to operate the reservoirs differently, and it continues just kind of to surprise to the upside.”

McKenzie says he can’t guarantee the Lloyd thermals will continue to outperform the way they have over the last few quarters.

“But what I would say is we just continue to find opportunities here that provide that kind of upside for us,” he said.

In the meantime, a major seven-week turnaround is set to start at the Lloydminster Upgrader that will impact throughput in second quarter by about 45,000 bbls/d.

This has already been reflected in the company’s corporate guidance for the year.

GEOFF LEE STAFF WRITER