Get Back On My Stroud? Canadian Congestion Revives Cushing Rail Option
New production expected online in December 2017 from the Suncor Fort Hills project in the oil sands region of northern Alberta could increase pipeline congestion from western Canada to the U.S. Gulf Coast market where the oil is in demand. That’s because existing capacity across the Canadian border is running close to full and the only possible capacity addition across before 2019 is Enbridge’s 300-Mb/d Alberta Clipper expansion at the border — assuming it gets a long-sought U.S. Presidential Permit later this year. As a result of this continuing near-term pipeline squeeze, producers are again turning to rail transport to bypass pipeline congestion and ensure their crude gets to market. On June 2 (2017), USD Group announced a new route option for Canadian producers following its purchase of a rail terminal in Stroud, OK, that is connected by pipeline to the Midwest crude trading and storage hub at Cushing, OK; USD will offer direct rail service from its Hardisty, AB, terminal to Cushing. Today we review the economics of this rail transport route for oil sands producers. (This blog is based on a recent note published by Morningstar Commodities and Energy Research.)
