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Jan 29, 2020

Cenovus credits quota easing as it ramps up crude-by-rail output to 100,000 bpd

Keith Richards discusses Cenovus

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CALGARY - An executive with Cenovus Energy Inc. says it produced more crude in December thanks to the Alberta government's decision last fall to allow producers to exceed provincial quotas if they move the additional barrels by rail.

Executive vice-president Drew Zieglgansberger says the oilsands company met its goal of ramping up its crude-by-rail shipments to 100,000 barrels per day by the end of last month, an accomplishment that he said bodes well for its oilsands expansion plans this year.

The comments at a business conference in Banff follow a report from Canadian National Railway Co. on Tuesday that it moved 20 per cent more crude carloads in 2019 and it expects oil to be a "growth driver" again this year.

In a report on Wednesday, analyst Phil Skolnick of Eight Capital says several Canadian oilsands companies bumped up production in December thanks to the rail allowance, a 10,000 bpd reduction in overall provincial oil production limits and the recovery of the Keystone export pipeline after an outage in the United States.

He says Alberta oil storage inventories rose, which caused a widening of the discount paid for Alberta crude in comparison with U.S. benchmark oil prices.

However, he says inventory levels have started to fall again due to small capacity expansions on existing pipelines and higher crude-by-rail shipments, adding that when combined with planned second-quarter oilsands maintenance shutdowns, price discounts are expected to narrow over the coming quarter.