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Go Your Own Way – Can Canadian Railbit Crude Compete With Pipelines?

RBN Energy estimates that by 2015 rail terminal capacity to load heavy bitumen “dilbit” crude in Western Canada will be about 800 Mb/d. Unload terminals hoping to receive that crude on the Gulf Coast will have about 1 MMb/d capacity by 2015. Moving that crude by rail will compete directly with planned pipelines expected to be in service by 2015. Yet the details show only about 25 percent of Canadian rail terminals will be able to load railbit crude, which has less diluent. And the terminals that do handle railbit will not be handle larger unit trains. Today we continue our analysis of Canadian crude transport options.

In the first episode in this series we attempted to answer two key questions that determine the fate of Canadian heavy crude shipments by rail (see Go Your Own Way – The Rail vs. Pipeline Bitumen Challenge). First - is rail capacity needed to supplant a shortfall in available pipelines now or in the future? Second can the cost of bitumen by rail transport compete against pipelines? We concluded that there is no clear answer to these questions yet. In the second and third episodes we surveyed the rail terminals currently being planned and built to load heavy crude in Western Canada (see Go Your Own Way Alberta Rail Load Terminals Part 1 and Part 2). In the fourth and fifth episodes we surveyed 8 rail terminals on the CN direct network that are able to handle heavy crude today or plan to be able to handle heavy crude in the future on the Mississippi Gulf Coast. Episode six covered operating or planned terminals on the Texas Gulf Coast. This time we summarize the rail capacity to load crude in Western Canada and unload it at the Gulf Coast.

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Bitumen Transport Options

Before we begin our summary lets review the various transport options for heavy Canadian bitumen crude oil. Raw bitumen from oil sands is dense and treacle like, and it does not flow at room temperature. Bitumen is either mined at the surface or extracted “in-situ” by heating the well with injected steam so that the oil flows.  More than half of all extracted bitumen is then upgraded to synthetic crude oil (SCO) that can be transported just like any conventional crude. The majority of mined bitumen is upgraded.  The percentage of synbit is falling because the economics of upgrading are not good. Most new production is in-situ – about 90 percent of which is not upgraded. Transporting this non-upgraded bitumen to market requires either mixing it with lighter hydrocarbon solvents such as natural gasoline or condensate  (known as diluents) or heating it until it reaches a temperature at which it flows easily (as high as 200o Fahrenheit). To move bitumen on a regular pipeline typically requires blending in 28 percent diluent to create a crude known as “dilbit”. Dilbit flows easily enough year round to allow it to be pumped through a pipeline. The trouble with dilbit is that refiners don’t like the resulting crude blend because it has too many light hydrocarbon components that they do not typically need (see Turner Mason and the Goblet of Light and Heavy). The result is that the diluent used to move bitumen is considered a “mule” that has to be procured – often from far away (see Fifty Shades of Eh?) and adds to the volume shipped without adding to the real payload.

So both refiners and shippers would prefer to use less diluent to move bitumen to market if they could and rail shipment offers that possibility. Bitumen can be made to flow over shorter distances when mixed with less than 28 percent diluent but that flow may require a heated pipeline or railcar in winter temperatures. A common blend of bitumen and diluent used for rail transport is called “railbit”, which contains 17 percent or less diluent. Railbit can be transported by rail but shippers have to use rail tank cars with insulation and heated steam coils to keep the crude from freezing up in cold temperatures. A third alternative to dilbit or railbit is to move “raw” bitumen with very little or no diluent added. Since some diluent is typically added to bitumen to move it from the wellhead to a pipeline or to a terminal by truck, raw bitumen is not usually transported. However, it is possible to remove diluent from bitumen prior to transportation using a diluent recovery unit (DRU).

If raw bitumen is shipped by rail it has to be heated to ~200o F to load onto an insulated rail tank car that has special heating coils. On arrival at the destination, the coils are heated for up to 24 hours by passing steam through them to enable the bitumen to flow out of the railcar. The bitumen than has to be moved by insulated pipeline to a heated storage tank. Onward shipment to refineries requires insulated pipelines or heated barges.

Western Canada Rail Loading Facility Summary

Two detailed tables in this episode summarize the current state of rail transport capacity from Western Canada to the US Gulf Coast. The tables represent the latest information that we have obtained from public sources. Please let us know at info@rbnenergy.com if you spot any errors or omissions and we will update the tables. The first Table #1 below lists terminals that are located in the heavy oil producing regions of Alberta and Saskatchewan provinces. The top 9 facilities in the table are shaded green to indicate that they have now or plan to have in the future, the ability to handle unit trains (that can load 100 cars or more). Otherwise the column titles at the top of the table are mostly self-explanatory. Column one is the operator and or owner of the facility. The two railroads are Canadian Pacific (CP) and Canadian National (CN). Location is a city or town close to the rail terminal. The “Facility Type” column indicates (where available) whether the terminal can handle unit trains and what type of crude can be loaded – dilbit or railbit. 

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