CP sees signs of life in crude-by-rail ship­ments

National Post (National Edition) - - FINANCIAL POST - AL­LI­SON LAM­PERT AND NIA WIL­LIAMS

MON­TREAL • Cana­dian Pa­cific Rail­way Ltd. sees ship­ments of crude by rail “com­ing alive a lit­tle bit,” chief mar­ket­ing of­fi­cer John Brooks said on Tues­day, sig­nalling a pickup in a busi­ness that had been hurt by low en­ergy prices and competition from pipe­lines.

Many traders are ex­pect­ing a pickup in crude by rail vol­umes in 2018 as oil sands projects in­clud­ing

Sun­cor En­ergy Inc.’s Fort Hills plant and the lat­est phase of Cana­dian Nat­u­ral Re­sources Ltd.’s Hori­zon oil­sands start pro­duc­ing at the end of this year.

Cana­dian rail­way ex­ec­u­tives, how­ever, re­main cau­tious about crude-by-rail de­mand af­ter they were forced to slash rates for ship­ping crude in 2015 due to a rout in global oil prices.

“The en­ergy sec­tor is re­ally get­ting in­ter­est­ing,” Brooks told a Toronto trans­porta­tion con­fer­ence, not­ing de­mand for ship­ping sev­eral en­er­gyre­lated prod­ucts in­clud­ing frack sand, which is used in the hy­draulic frac­tur­ing process.

CP, Canada’s sec­ond­largest rail­road, in Oc­to­ber re­ported a bet­ter-than-ex­pected quar­terly profit on higher ship­ments of crude oil, coal and potash.

En­ergy in­dus­try play­ers are brac­ing for con­ges­tion on Canada’s ma­jor ex­port pipe­lines, which are run­ning close to ca­pac­ity, while un­der­uti­lized rail loading ter­mi­nals built dur­ing a crudeby-rail boom in 2014 are in­creas­ing loading vol­umes.

Tran­sCanada Corp. in Oc­to­ber scrapped its $12-bil­lion En­ergy East pipe­line that would have taken crude from Al­berta to Irv­ing’s gi­ant re­fin­ery in New Brunswick, which could fur­ther in­crease pro­duc­ers’ re­liance on crudeby-rail.

Cal­gary-based Gib­son En­ergy said on a third-quar­ter earn­ings call that it has started to see its Hardisty rail ter­mi­nal in cen­tral Al­berta be­ing used more than in the past. And Cen­ovus En­ergy

Inc., which owns the Bruder­heim ter­mi­nal near Ed­mon­ton, said this month it has ad­di­tional ca­pac­ity to meet in­creased de­mand as it arises.

“With new pro­duc­tion ex­pected to come on line in the next year … we are about to reach the lim­its of cur­rent pipe­line in­fra­struc­ture. This will likely re­sult in a need to turn to rail as a stop­gap to al­low the new crude pro­duc­tion to reach re­finer­ies,” an­a­lysts from con­sul­tancy Turner Mason & Com­pany said on Tues­day in a client note.

The most re­cent Na­tional En­ergy Board data showed Canada ex­ported 93,000 bar­rels per day (bpd) by rail in July, down 40 per cent from a 2017 high of 156,000 bpd in March.

How­ever, since the sum­mer the price dis­count on Cana­dian crude in Al­berta ver­sus its global bench­mark has widened and is ex­pected to deepen in com­ing months. With the wider dif­fer­en­tial rail ship­ments be­come more eco­nomic, even though they are still costlier than mov­ing crude by pipe­lines.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.