Canadian crude returns to the rails

A Canadian heavy crude-by-rail revival may be on tap in 2017 as exports averaged a record 2.26mn b/d this year, topping the 2.21mn b/d in potential takeaway capacity on the country’s four major pipeline systems.

Key Points:

  • Canadian Association of Petroleum Producers (CAPP) forecasts oil sands heavy crude production will rise by nearly 300,000 b/d in each of the next two years, to 2.54mn b/d in 2017 and 2.84mn b/d in 2018, and no chance of any of the proposed takeaway expansion projects on line by then.
  • That could benefit rail, the only other way to move material volumes of heavy crude out of the region. The three largest heavy crude loading terminals are the 210,000 b/d facility owned byKinder Morgan and ExxonMobil-controlled Imperial Oil at Edmonton, Alberta; USD Group and Gibson Energy’s 140,000 b/d terminal at Hardisty, Alberta; and Altex’s 88,000 b/d terminal at Lashburn, Saskatchewan.
    • A host of smaller terminals across Alberta and Saskatchewan also are available, as well as the 70,000 b/d facility at Kerrobert, Saskatchewan, that Plains All American Pipeline mothballed soon after opening this year.
  • The crude-by-rail renaissance has not happened yet. Canada exported only about 69,000 b/d by rail in September, the highest level since May despite being down by 91,000 b/d year-over –year. Volumes peaked at 179,000 b/d in September 2014 and were consistently in the mid-100,000 b/d range from May 2013 until January 2015, when Enbridge increased heavy takeaway capacity by 120,000 b/d.
  • Gibson believes its crude car fleet soon will see more action as more long-ago commissioned oil sands projects, such as the Suncor-operated 180,000 b/d Fort Hills mine set to start operations in a year, come on stream.