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Gibson Energy plans to add 2 MMBO of storage over the next few years

Gibson Energy (ticker: GEI) has received committed shipper support to proceed with the construction of 2 additional crude oil storage tanks at the Hardisty storage hub. The two tanks will have a combined capacity of 900 MBO, with one tank holding 0.5 MMBO and the other holding 0.4 MMBO. The 0.5 MMBO storage tank is backed by a long-term agreement with Teck Resources Limited (ticker: TCK), according to a press release.Hardisty in Alberta

The two storage tankers announced today are expected to be in-service by the middle of 2017. The company has already commissioned four storage tanks since 2012 with a capacity totaling 1.7 MMBO. Including the two new tanks, the company plans to add five more tanks, giving the company an additional 2.0 MMBO of storage capacity. The expansions since 2012 will give GEI a total storage capacity of 8.0 MMBO at Hardisty.

Rick Wise, Gibson’s Chief Operating Officer, said the long-term agreement with Teck represents the resilience of growth plans in the Canadian oil sands. “Despite today’s depressed oil price environment, a robust growth profile remains in place for oil sands related production volumes,” said Wise.

GEI is looking to increase storage capacity as more companies sell their oil on the futures market. Storage in Canada comes with some disadvantages though, according to Brian Busch, director of oil markets at Genscape, which tracks oil storage in North America.

“Canada is not the ideal place to do a storage play to take advantage of contango,” says Busch. Storing in hubs like Hardisty means that traders need to arbitrage the difference between the discounted price of Canada’s heavy Western Canadian Select against West Texas Intermediate (WTI), says Busch. The lack of pipeline export capacity also contributes to a “basis risk,” because producers need to lock in a contract to get their oil to market.

“If you can, you’d much rather move the barrels out of Canada to take advantage of above-ground storage along the Gulf Coast – if you possibly can – or to take advantage in Cushing.”

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.