Canadian Bitumen

Over the past two years the volume of crude oil shipped by rail from Canada has increased ten-fold.  Data from the Canadian National Energy Board (NEB) for the whole of Canada indicates that average rail crude exports in the first quarter of 2012 were about 16 Mb/d. That volume grew to at least 160 Mb/d in the first quarter of 2014. The increase in rail exports of crude is primarily being driven by pipeline capacity constraints. Today we introduce findings from RBN Energy’s latest Drill Down Subscriber report.

With TransCanada repurposing their Mainline gas pipeline to ship crude from Western Canada to the East and two new unit train crude loading terminal projects underway in Edmonton and Hardisty, competition between rail and pipelines is intensifying. The scale of the investments being made by companies such as Kinder Morgan and Gibson Energy suggests that producers and refiners believe that crude by rail is here to stay. Today we continue our review of rail terminal infrastructure developments in Western Canada.

New pipeline capacity from Cushing to the US Gulf Coast, expected online at the end of 2013 and early in 2014, will ease the congestion that has stranded a lot of Western Canadian crude in the Midwest. There will subsequently be more opportunity for Canadian oil sands crude to reach Gulf Coast refineries by pipeline. Yet at the same time Canadian bitumen producers, rail terminal operators and railroad companies are jointly developing unit train loading terminals in Alberta - including one announced yesterday by Kyera Corp and Kinder Morgan Energy Partners. These terminals plan to load Canadian crude for delivery to the Gulf by rail. Today we ask how rail can compete with pipelines on this route.

Demand for imports of condensate to use as a diluent for blending with heavy Canadian bitumen crude is expected to increase from 200 Mb/d in 2013 to over 500 Mb/d by 2020 according to the Canadian Energy Research Institute. This is a very big deal.  Last week we described the route that Plains All American developed to ship condensate from the Eagle Ford to Western Canada. Today we describe similar plans being developed by Kinder Morgan.