CALGARY, AB – US Development Group, LLC (through a wholly-owned affiliate, collectively USD) and Gibson Energy Inc. (Gibson) (TSX: GEI) announced the diluent recovery unit (DRU) has been declared fully operational and the shipment of DRUbit™ by Rail™ (DBR) has commenced. The DBR network creates a first-of-its-kind separation technology and network that safely and sustainably moves heavy Canadian crude oil, also known as bitumen, from Canada to the U.S. Gulf Coast at a cost that is competitive with pipeline alternatives.
The DRU is located at the Hardisty Energy Terminal (HET) near Hardisty, Alberta and is a 50%/50% joint venture between USD and Gibson. HET is located adjacent to USD’s existing Hardisty Rail Terminal, which is the origination terminal for transloading the DRUbit™ onto railcars for shipment. The current destination terminal for the DRUbit™ is the USD-owned and operated Port Arthur Terminal (PAT) in Port Arthur, Texas. The DRUbit™ is owned by ConocoPhillips. This DBR network is highly scalable and is well-positioned for future commercial expansions. USD and Gibson continue to pursue commercial discussions with current and potential producer and refiner customers to secure additional long-term agreements to support future expansions at both the DRU and the PAT.
USD’s patented DRU technology separates the diluent that has been added to the raw bitumen in the production process, which meets two important market needs. It creates DRUbit™, a proprietary heavy Canadian crude oil or bitumen that ships by rail and does not meet any of the defined categories of hazardous materials by U.S. DOT Hazardous Materials regulations and Canada’s Transport of Dangerous Goods regulations, creating safety and environmental benefits. Additionally, it returns the recovered diluent to ConocoPhillips at HET for reuse in the Western Canadian market, which reduces delivered costs for diluent. The DBR network provides meaningful safety, economic and environmental benefits relative to conventional crude by rail.
The DRU at HET is operating at or above its nameplate capacity of 50,000 barrels per day of inlet bitumen blend, which the DRU separates into DRUbit™ and diluent. Transporting DRUbit™ by Rail™ is projected to reduce carbon emissions nearly 20% relative to dilbit by rail alternatives and approximately 30% compared to dilbit by pipeline alternatives.
The DBR network is supported by Canadian Pacific (CP) (TSX: CP, NYSE: CP) and Kansas City Southern Railway Company (KCS). As the initial destination terminal, PAT is unloading DRUbit™, blending it to customers’ specifications, and delivering it downstream through pipe or barge at or above current contractual requirements. PAT has significant marine, pipeline, rail and tank expansion capabilities and it is pipeline connected to Phillips 66’s Beaumont Terminal, providing customers access to a large network of refining and marine facilities. PAT has the infrastructure and ability to support growth, including allowing for efficient rail movements along mainlines from Canada and into the growing Mexico market.
The Honorable Jason Kenney, Premier of Alberta
“Alberta’s government is obsessed with creating the best environment for job creation in Canada. We know that is the best way to attract innovators and entrepreneurs, who will help kick-start Alberta’s recovery. Not only will this vote of confidence in Alberta’s economy help to create jobs, it helps to tell our story about our energy industry, and how it constantly strives to lead the world in innovation and emissions reductions. Thank you to CP, Gibson Energy, US Development Group, ConocoPhillips, and Kansas City Southern for helping to ensure the strength and sustainability of Alberta’s energy sector.”
“Using the DRU separation technology and DRUbit™ by Rail™ network improves netbacks and overall returns as we move our bitumen production to high-value North American markets,” said Bij Agarwal, President, ConocoPhillips Canada. “An innovative solution, the DRU separation technology and DRUbit™ by Rail™ network – which provide transportation safety and environmental benefits – will also create jobs along the rail routes and help to address constrained market access, for the benefit of all Canadians.”
“Our DRU separation technology and DRUbit™ by Rail™ network create a first-of-its-kind infrastructure to move heavy Canadian crude throughout North America in a way that is safe, environmentally beneficial and economically advantaged to current pipeline alternatives,” said USD CEO, Dan Borgen. “The project stands to strengthen communities with long-term, high quality jobs along the current and future rail routes. We are thrilled to work with ConocoPhillips Canada, Gibson, CP, and KCS to deliver this industry solution that we believe will positively impact our existing and future producer and refiner customers.”
“We were pleased to see the Hardisty Energy Terminal fully operational in-line with budgeted capital cost,” said Steve Spaulding, Gibson’s President and Chief Executive Officer. “We consider DRUs to be a cost-effective, scalable, environmentally attractive long-term egress solution for the basin, and we remain in commercial discussions for potential additional phases at the Hardisty Energy Terminal. Importantly, we believe that this and future phases will improve netbacks for producers, driving increased oilfield and related business activity, creating new jobs and helping revive communities.”
“The launch of DRUbit™ by Rail™ over the CP network helps us to achieve key sustainability goals while creating new efficiencies for customers,” said Keith Creel, CP’s President and Chief Executive Officer. “CP is proud to work with USD and Gibson to make this innovative terminal a success.”
“KCS is pleased to be a strategic partner in this innovative solution to improve the safety and economics of moving crude oil,” said KCS President and Chief Executive Officer Patrick J. Ottensmeyer. “It’s also a great opportunity to grow our business in the Gulf Coast area and further develop our strategic presence in the Port Arthur market.”