CHEMTRADE ELECTROCHEM INC CALGARY, Alberta (Reuters) - Cenovus Energy Inc (>> Cenovus Energy Inc), Canada's No. 2 independent oil producer, has agreed to buy the Bruderheim, Alberta, crude-by-rail terminal from Canexus Corp (>> Canexus Corp) for C$75 million in cash, the two companies said on Thursday.
The 70,000 barrel-per-day Bruderheim facility was western Canada's first unit train terminal, capable of loading more than 100 tank cars of crude in one go at a cheaper rate than mixed cargo manifest trains.
It is connected by pipeline to projects in Alberta's vast oil sands, the world's third largest crude reserves, and was seen as a front-runner in what many industry observers forecast would be a Canadian crude-by-rail boom.
But the terminal, 50 kilometers (30 miles) northwest of Edmonton, has struggled to reach full capacity since it opened in late 2013. It was put up for sale last August after construction costs spiraled to C$356 million.
Canexus, a Calgary-based chemicals and handling company, which also owns sodium chlorate and chlor-alkali plants in Canada and Brazil, said it will use the sale proceeds to pay down bank debt.
"By returning to our roots as a pure chemical producer, we are returning to what we do best," Canexus Chief Executive Doug Wonnacott said.
Cenovus is already a committed shipper at the Bruderheim terminal and will buy the unit and manifest train operations, pipeline connections to the facility and some above and below ground storage.
The oil sands producer said the acquisition would help maximize market access, capture global prices for its oil and give access to niche markets not served by pipeline.
"As the owner of the facility, we reduce our risk of having to compete for expensive rail terminal capacity during periods of pipeline congestion or potentially having production volumes stranded," said Bob Pease, executive vice president of markets, products and transportation.
Cenovus will hire a third-party service provider to manage the facility, and said the terminal could be expanded if changing market conditions make rail economics more attractive.
The current discount on heavy Canadian crude bought in Alberta is too narrow to offset the cost of shipping it by rail to U.S. markets.
So far the Canadian crude-by-rail boom, forecast to hit 700,000 bpd by end-2016 according to the Canadian Association of Petroleum Producers, has failed to materialize.
National Energy Board data on Wednesday showed Canadian crude-by-rail exports plunged 28 percent in the first quarter of 2015, as shippers moved more oil by pipeline, which is cheaper.
(Editing by Leslie Adler)
By Nia Williams
