As recently as five years ago, barely 1,000 barrels of crude oil moved on trains in Canada each day, or about two tanker cars. Today, according to a Peters & Co. Ltd report published Tuesday evening, approximately 550,000 barrels move on Canadian railways daily, equal to about 800 tanker cars. By the end of this year, that figure is expected to top 1,000,000 barrels per day.
Calculating the percentage of such rapid expansion would be an exercise in eyebrow-raising, so just rest assured the growth is exponential.
New pipelines require extensive regulatory analysis and, if they cross the Canada-United States border, must also receive personal approval from the President. Loading terminals designed specifically to fill empty train tanker cars with crude oil, require basically the same permits and approvals as any other industrial site. Expanding those terminals is even easier.
New pipelines require extensive regulatory analysis and, if they cross the Canada-United States border, must also receive personal approval from the President. Loading terminals designed specifically to fill empty train tanker cars with crude oil, require basically the same permits and approvals as any other industrial site. Expanding those terminals is even easier.
The Peters report notes there are a few potential expansions being discussed for terminals already under construction that could bring western Canada’s total crude-by-rail loading capacity closer to 1,500,000 bpd as early as next winter. Compare that figure to Canada’s largest export pipeline network: Enbridge’s 2,000,000 bpd mainline that currently handles most of the 2,400,000 barrels of oil Canada sends to the United States on a daily basis, according to National Energy Board (NEB) data.
COST COMPETITIVE WITH PIPELINES
By far the largest impediment to producers using more train-based transportation options is the higher cost relative to pipeline transportation. That no longer appears relevant. Peters notes a producer that doesn’t own any of its own tanker cars or terminals might have to pay as much as $20 to ship a barrel of oil on a train from western Canada to U.S. markets, but if they own “significant rail related infrastructure”, as is the case with several oil sands giants leasing thousands of their own rail cars, the cost can be as low as half or about $10 per barrel.
Pipelines remain generally less expensive but not by much. For so-called “committed” shippers (read: those who have promised to send a certain amount of their daily production down a certain pipeline), prices range from $7 to $10 per barrel. Yet for uncommitted shippers, the cost range jumps as high as $14 per barrel.
Put another way: if an oil producer with some investments in rail infrastructure lacking “committed” status on an available pipeline, the less expensive option would be rail; by a huge margin no less.
WHAT ABOUT NEW REGULATIONS?
Ever since a train from a now defunct railway destroyed the town center of Lac Megantic, Quebec last July at the cost of 47 human lives, anticipation has grown among crude-by-rail shippers for governments to enact costly safety standards on the trend. Some new rules have been announced and there are likely more to come, though Peters argues the impact is likely to be negligible.
“Regarding the potential for new regulations, any impact would be unknown until finalized, with rumours continuing to circulate that certain parts of the North American rail car fleet will need to be retrofitted, which would reduce the number of cars available for use and require material new capital investment from industry,” the report said. “Overall, despite potential negative setbacks from new regulatory changes and some new costs added to the equation, we have been gaining increased confidence that investments in new rail takeaway capacity will improve the Canadian crude differential outlook.”
WHAT ABOUT NEW REGULATIONS?
Ever since a train from a now defunct railway destroyed the town center of Lac Megantic, Quebec last July at the cost of 47 human lives, anticipation has grown among crude-by-rail shippers for governments to enact costly safety standards on the trend. Some new rules have been announced and there are likely more to come, though Peters argues the impact is likely to be negligible.
“Regarding the potential for new regulations, any impact would be unknown until finalized, with rumours continuing to circulate that certain parts of the North American rail car fleet will need to be retrofitted, which would reduce the number of cars available for use and require material new capital investment from industry,” the report said. “Overall, despite potential negative setbacks from new regulatory changes and some new costs added to the equation, we have been gaining increased confidence that investments in new rail takeaway capacity will improve the Canadian crude differential outlook.”
Source: bnn.ca
