The Ceres Global Ag Corporation has concluded a comprehensive review that it launched last September, and has announced multiple changes that affect its oil and agriculture rail terminal at Northgate, which is under construction.
Ceres has ended its arrangements and ongoing discussions with The Scoular Company regarding the development and construction of the grain facility. Ceres plans to use its subsidiary, Riverland Ag, for the design and development of the Northgate grain elevator.
CEO Michael Detlefsen said Ceres has been looking for ways to enhance business through its Riverland assets, and they believed that Northgate was one of those options.
"We looked at the relative economics, and decided that the option of doing it ourselves generated higher value for Ceres' shareholders than the current Scoular deal that was on the table," Detlefsen told Lifestyles.
In a press release, Scoular said the termination was first communicated by Ceres at the end of January, and Scoular objected to the action. Termination of Scoular's relationship with the Northgate project, and with Ceres, remains under discussion, Scoular said, and the details won't be released.
"This decision is disappointing to Scoular and, more importantly, is a setback for customers at Northgate who will be deprived of access to our long-established international shipping networks serving end-use customers," said Scoular CEO Bob Ludington.
Detlefsen said Ceres' previous board had considered using Riverland for design and development before the project was announced last February. Ceres' new board, which took over last September, was more open to the Riverland option.
He believes it was a prudent decision.
Ceres also plans to spend up to an additional $17.4 million during the 2014 construction season for the planning and design of the grain facility, and the planning, design and initial construction of the oil and natural gas liquids transload terminal.
The company expects to complete the remaining site preparation, track installation and associated port infrastructure by early summer 2014.
Detlefsen said he's not sure if the decision to opt for Riverland will cause any delays for the project. Ceres is still assessing the timelines associated with moving in-house.
"We'll know a lot better in a couple of weeks, probably by the 10th (of March), what the exact timing is going to look like," said Detlefsen.
Once the preparation work is completed and all necessary approvals are obtained, Ceres believes the Northgate project will have the infrastructure to allow for trains to cross the border into Canada, and to facilitate the trans-loading of agricultural, petroleum and other bulk commodity products.
"If all goes according to plan, we could start up the oil shipments – and this would be a combination of oil and natural gas liquids – as soon as this summer," said Detlefsen.
The Northgate site preparation is approximately 75 per cent completed, with the majority of the earthworks finished and 1,150 metres of installed rail track running north from the Canada-U.S. border into the site.
The Burlington Northern Santa Fe Railway (BNSF) has also started to make significant upgrades to its network on the U.S. side of the border, with a rail connection installed and ready to connect to the Northgate site.
Ceres announced last year that it had purchased 1,500 acres of land to construct a new commodity logistics hub, with two rail loops that will each be capable of handling unit trains of up to 120 railcars.
One loop will be dedicated to a grain handling and shipping facility, and the other to transloading and shipping oil. In addition, a logistics centre will unload imported equipment and materials for Saskatchewan's resource economy.