Oilsands companies mull ways to boost crude-by-rail capacity

CALGARY— Pipeline project delays and growth in crude-byrail capacity from Western Canada are leading some oilsands producers to consider spending billions of dollars to build diluent recovery units.

Oilsands bitumen is a thick, sticky oil that must be diluted with light petroleum to flow in a pipeline, but diluent isn’t needed for rail transport because the product can be heated for loading and unloading.

Building diluent recovery units at Alberta rail-loading terminals would allow about onethird more room for bitumen in the railcar to improve the efficiency and profitability of using rail to supply refineries in the southern U.S., said Eight Capital analyst Phil Skolnick in a report published Friday.

“DRUs in some cases can provide attractive returns, but more importantly, they can also improve the landscape of crude-by-rail and egress,” he said.

“However, reduced costs and maximum diluent recycling are key to making this effort work.”

Shipping more bitumen by rail would free up space on export oil pipelines, he added, helping to relieve a glut of trapped oil in Alberta that led to the province imposing production curtailments this year after price discounts soared last fall.

Shipping undiluted or “neat” bitumen would also improve safety because, unlike the diluted product, it’s not considered very flammable, Skolnick pointed out.

Cenovus Energy Inc. is investigating building a recovery unit at its rail terminal near Edmonton which would cost between $800 million and $1 billion, CEO Alex Pourbaix told The Canadian Press in a recent interview.

Cenovus has promised an update on the proposal at its October investor day.