By Kristen Hays
HOUSTON (Reuters) - Three years ago Dan Borgen exited the domestic oil-by-rail business just as it was ramping up to focus on building infrastructure to get Canadian crude on trains to U.S. markets.
Now Borgen is back in what appears to be another counter-cyclical move. The global oil rout squeezed crude-by-rail's profitability, sending Canada-to-U.S. shipments down by 30 percent from the third quarter last year.
Even so, Borgen, chief executive of USD Partners LP , and USD's main private equity backer, $5 billion Energy Capital Partners, are on the hunt for U.S. terminals to take shipments from their loading terminal in Alberta.
"Canadian producers - or any producers - want new and varied market access," Borgen said.
U.S. crude's slide to $35 a barrel this week has left many Canadian producers selling crude at a loss with outright prices hovering near $22 a barrel, a near-decade low. Canadian crude trades at a discount to U.S. oil because of quality and costs to move it to domestic markets.
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Canadian railroads also are cutting rates to lure more barrels back on the tracks.
But Borgen and Doug Kimmelman, a 22-year Goldman Sachs Group Inc veteran who helped found ECP two years ago to focus on midstream and power investments, see opportunity to pick up distressed assets and build out terminals with no pressure to tap tight capital markets.
"You lick your chops as you see turmoil in the midstream areas," Kimmelman said.
USD recently bought a Wyoming rail terminal for $208.3 million and secured land at the clogged Houston Ship Channel to build another to blend custom crudes for U.S. customers and eventually export. They expect to find more assets, Kimmelman said.
They are betting such infrastructure to receive Canadian barrels will pay off with current cross-border pipelines full and others delayed amid strong environmental and aboriginal opposition.
The companies struck the Wyoming and Houston deals before the Obama administration nixed the controversial Keystone XL pipeline, though "that certainly doesn't hurt us," Kimmelman said.
USD Partners went public in October 2014, a month after ECP's investment let the general partner, U.S. Development Group, repurchase most of Goldman's long-standing investment.Kimmelman said ECP has invested "a few hundred million" and remains committed to investing at least $1 billion, despite the downturn.
"Maybe now, things are a bit soft, but we don't see that as a long-term phenomenon," he said.
(Reporting by Kristen Hays; Editing by Leslie Adler)