Cenovus Energy is sending a shipment of crude oil down through the Panama Canal as part of its first-ever transaction with New Brunswick’s Irving Oil.
The oil shipment will make the 11,900-kilometre journey to Irving’s refinery in Saint John by tanker ship, Cenovus announced in a social media post on Wednesday.
The news comes two months after Irving Oil, the operator of the country’s largest refinery, surprised the sector with its plans to begin receiving more crude from Western Canada by using tankers starting this summer.
Cenovus vice president Keith Chiasson said in a statement provided to CBC News that it’s a “one-off “shipment for now.
“But we believe this Canadian success story has the potential over time to create significant value for both companies and the entire country,” he said, adding Cenvous is pleased with the economics of the transaction.
On Friday, Alberta Premier Jason Kenney said he considered Irving Oil’s decision to seek more oil from the West to be an “important expression of confidence” in Canada.
But he said the long journey via tanker also underscores the need for national pipeline infrastructure.
“On the one hand, it makes me happy that we’re finally going to be able to supply a Canadian refinery on the East Coast with Alberta oil, but it just underscores how crazy this whole situation is,” said Kenney, pointing to the cancellation of the Energy East pipeline nearly three years ago.
The Energy East project would have carried more than one million barrels of oil every day from Alberta and Saskatchewan across the country to be refined or exported from facilities in New Brunswick and Quebec.
The energy giant then known as TransCanada — since renamed TC Energy — had proposed adding 1,500 kilometres worth of new oil pipelines to an existing network of more than 3,000 kilometres, which would have been converted from carrying natural gas, to carrying oil.
About 99 per cent of Canada’s exports now go to refiners in the U.S., where limits on pipeline and refinery capacity mean Canadian oil sells at a discount.
Privately held Irving applied this spring to the Canadian Transportation Agency (CTA) to use foreign tankers in order to increase the amount of domestic crude it gets from offshore Newfoundland and Western Canada.
Irving Oil’s application included a proposal for the tankers to transport oil from a terminal in Burnaby, B.C., through the Panama Canal and on to Irving Oil’s refinery in Saint John.
The company said at the beginning of May that it wanted to increase the mix of Canadian crude it uses, which at that time was in the range of 20 per cent.
Increasing the amount of Canadian oil that the refinery uses would displace the crude imports the company gets from around the world, but it wasn’t clear which shipments might be affected.
An official with the refinery said at the time that it uses a “significant” amount of oil from the United States.
Chiasson said the transaction shows the ability of the two companies “to help drive Canada’s economy even during these unprecedented times of turbulence created by the COVID-19 pandemic and the resulting challenges for the energy industry.”
Tanker shipment comes as TMX, Keystone XL pipelines move forward
News of the Cenovus shipment via tanker to the East Coast came as the Supreme Court released a decision dismissing a First Nations’ legal challenge to the Trans Mountain expansion project.
The Trans Mountain pipeline will allow Canada to diversify oil markets and vastly increase exports to Asia, where they can command a higher price than those sent to the U.S.
Some experts said the top court’s decision to end the years-long legal battle demonstrates stability to potential investors and provides clarity about what constitutes adequate consultations with Indigenous groups.
And on Friday, Alberta’s premier visited the small town of Oyen to mark the start of construction within the province of the Keystone XL pipeline. Work is already underway in three U.S. states.
The 1,947-kilometre project will be able to carry 830,000 barrels of crude oil per day from Hardisty, Alta., to Steele City, Neb., where it will connect with TC Energy’s existing facilities and eventually reach refineries on the Gulf Coast.