Weyburn 鈥� At the Saskatchewan Oil and Gas Show, Tundra Energy Marketing Ltd. (TEML) staff were handing out chocolate bars implying a rebranding of their company would be coming soon. That came two weeks later, on June 17, when the company was renamed Kingston Midstream.
The company has made it a practice of having their president and CEO attend the oil show in recent years, and this year was no different. Jim Hand, who recently took over the reigns of the top job, spoke to Pipeline Newson June 5. He was joined by Peter Forrester, vice-president, commercial, corporate and regulatory.
Hand said it was a fantastic show. 鈥淭o get two premiers, to talk over lunch, who are that supportive, of our industry? Frankly, it energizes me,鈥� he said.
鈥淔or me, this is my first time at the show. Kevin Armstrong (vice-president, operations) has been showing me around, introducing me to a lot of folks, because I鈥檝e only been with TEML for a little over half a year now. This was really my first opportunity to meet a lot of our suppliers and some of our customers.鈥�
鈥淚t鈥檚 going great,鈥� Hand said, when asked how things are going.
He noted they鈥檝e made some changes, with Armstrong now as vice president of operations in Estevan. 鈥淗e knows everyone, and has been around for decades.鈥�
鈥淲e鈥檙e finishing some of the integration with some of the Enbridge folks with some of the Tundra folks, and getting our team where we want it, to position us for future success.鈥�
鈥淲e鈥檙e adding some positions, like our supply chain and HSE, trying to centralize those to basically manage our business and leverage it across shared services. But for the most part, people in the Estevan area are still in the Estevan area.鈥�
The national discourse has often referred to a shortage of pipeline capacity. But in southeast Saskatchewan, where currently all oil is shipped on the now-Kingston Midstream system and none is going by rail, there is no shortage.
鈥淭hat鈥檚 right,鈥� Hand said. 鈥淚f you鈥檙e downstream of Kerrobert, you鈥檙e not typically getting apportioned on the Enbridge Mainline.鈥�
Apportionment is the practice of pipeline companies limiting how much can be shipped on their system, as the demand outstrips the shipping capacity. The Kingston Midstream system ties into the Enbridge Mainiline at Cromer, Man.聽
鈥淢ost of the bottleneck is upstream of us, which is a big advantage to the producers of southeast Saskatchewan and southwest Manitoba. They鈥檙e not dealing with the same apportionment issues as the people upstream, in Alberta.鈥�
There has been short-term apportionment on their system in the past, typically when a refinery goes into turnaround downstream, but not the long-term apportionment of what has been going on recently.
鈥淲e have room on our Westspur pipeline, and the Enbridge Mainline has room from Cromer, downstream. So we鈥檙e encouraging producers to drill more wells and bring on more production, and we need to help connect them to the system.鈥�
Enbridge noted in an email on June 26, "The space on the Enbridge Mainline system past Cromer varies and is dependent on pricing and market dynamics."
Forrester said, 鈥淛ust recognize, from a commercial perspective for producers in Saskatchewan, it鈥檚 not pipeline capacity on TEML which is an issue, it鈥檚 the takeaway capacity from Canada which is depressing prices. So every single day we don鈥檛 have pipeline capacity to international markets, we鈥檙e discounting our crude, in Saskatchewan and everywhere across Canada.鈥�
Saskatchewan discounts are as bad as what the oilsands have seen, according to Hand. 鈥淣ot like the oilsands discount. WCS, Western Canadian Select, sees a heavy discount, whereas the LSB crude that鈥檚 mostly from our area sees less. It鈥檚 still below WTI (West Texas Intermediate), though.
In late 2018, TEML settled a dispute over blending with several of its customers. That dispute, which had gone to the National Energy Board, is now behind them.
鈥淚t鈥檚 a lot better to be working together, collaboratively, than fighting. No one wins, except the lawyers,鈥� Hand said.
He said they鈥檝e had great conversations with CEOs, including Crescent Point鈥檚, Craig Bryska. 鈥淚 want to focus on the future and how we can help customers grow their business,鈥� Hand said.
The company has a rail loading facility at Cromer, Man. Despite growth in crude-by-rail usage in other parts of Canada, it hasn鈥檛 seen any action. 鈥淚t鈥檚 currently been mothballed, but we鈥檙e looking at opportunities of how we can use it,鈥� he said.
If the Energy East pipeline project had gone ahead, with it鈥檚 planned Cromer Lateral, TEML would have been in a position to offer southeast Saskatchewan and southwest Manitoba producers the ability to greatly broaden their potential clients. They could ship not only on the Enbridge Mainline to the American Midwest, but on Energy East to Quebec, New Brunswick and overseas via tanker. The rail facility at Cromer offers the rail option for any other facility on the North American rail system.聽
鈥淭hat鈥檚 our job, to give the producer any option they want to choose.鈥�
While Energy East is currently dead, Saskatchewan Premier Scott Moe and Alberta Premier Jason Kenney were both talking about a national energy corridor while at the oil show. This would essentially be something similar in concept to Energy East. Asked about a national energy corridor, if it were to go ahead, Hand said, 鈥淎bsolutely, we want to do whatever we can to help our customers increase their production and put it into whatever option that makes the most sense to them. The Enbridge Mainline will still be a key part of the system that we put barrels into. But, obviously, any other options that go by our infrastructure would be welcome, because you always want to provide your customers with options.
鈥淓verything comes down to economics and what makes the best decision. I couldn鈥檛 say for certain we would participate. But any pipelines, multiple pipelines, that get crude out of Canada, and get it to tidewater, it鈥檚 a good thing. Any pipeline, like Energy East, which actually replaces foreign oil, with Canadian oil, is a great thing.鈥�
On the Trans Mountain Expansion project, which at that point was still awaiting federal approval (granted June 18), Hand said, 鈥淚鈥檓 very hopeful it gets approved and moves ahead, absolutely.鈥�
Forrester added, 鈥淭rans Mountain is an important part. It gives us the ability to get the to the West Coast, which is an important part of the energy strategy. It gives us another outlet, and to allow us to get the right pricing for our pipelines, and for our oil.鈥�
The argument for Trans Mountain is that by 小蓝视频 able to sell oil at Brent prices in the global market, it would lift prices on the continent. Asked how it would impact TEML, Hand said, 鈥淚t impacts us by providing better economics to the producer who is then going to drill more wells, bring more production onto our system. So we benefit, because our producers benefit.鈥�
Asked about a concern expressed by some small junior producers in the region about the need for TEML to build more pipe in the region鈥檚 gathering system to connect to their batteries, as opposed to using truck terminals, Hand said, 鈥淚t鈥檚 economics, right? You have to look at how much volume, the length of the pipe, how many other producers that can be tied into the pipe, to make the best decision for our shareholders as well. But we鈥檙e constantly in discussions with our producers in how we can get them connected. Longer term, it鈥檚 better economics for them, which means hopefully better economics for us.鈥�
鈥淚鈥檝e really enjoyed my time here. It鈥檚 only been half a year from me, but I鈥檓 looking forward to meeting the people in southeast Saskatchewan,鈥� Hand concluded.聽
