CALGARY, Alberta, June 5 (UPI) -- Canadian energy company Cenovus said it agreed to spend roughly $75 million to acquire a rail facility for oil transport near Edmonton, Alberta.
"By purchasing this facility at an attractive price, we're taking greater control over a larger part of the value chain for our product, which we believe will result in improved margins and higher returns for our shareholders," Bob Pease, a vice president in charge of transportation for Cenovus, said in a statement.
Cenovus Energy said it agreed to purchase the North American Terminal Operations from Canexus Corp., taking what it said was a pole position in terms of market access for crude oil.
The NATO rail terminal is located about 30 miles northeast of Edmonton and links to lines owned by Canadian National Railway Co. and Canadian Pacific Railway. It can send about 70,000 barrels of oil per day by rail.
Canexus, which focuses primarily on chemical manufacturing and handling, said a portfolio review in August 2014 identified the rail terminal as a non-core asset. Company President Doug Wonnacott said Canexus was "pleased" to unload the rail terminal, saying it gave Canaxus a chance to re-focus on its foundations.
North American oil production has increased to the point that it's greater than the existing network of pipelines can handle. Several new Canadian networks, including the Keystone XL oil pipeline through the United States, are delayed, leaving energy companies to rely more on rail as an alternate transit method for crude oil.
The volume of crude oil delivered on the Canadian rail network as of March 2015 is six times greater than the volume delivered for the three months ending March 2012, data from the National Energy Board show.
Lower oil prices are acting, however, as a governor on North America's energy sector. NEB said an average 119,755 barrels per day were shipped for the three months ending in March. That's down 24 percent from the three-month period ending in December and 27 percent less than the same period in 2014.
