Canadian oil-by-rail exports to U.S. hit 18-month high
Signal pipelines are filling up to capacity ENERGY
• Canadian crude oil exports to the U.S. on railway cars hit an 18- month high in March, in a sign that pipelines are once again filling up to capacity, according to analysts.
New data from the National Energy Board show Canada exported 155,655 barrels of oil per day via railways in March, the last month for which data is available, up 52 per cent from 101,903 bpd during the same period a year ago.
The March shipments mark the largest volumes of crude oil exported on rail cars since October, 2015, when producers exported 166,807 bpd, according to data released by the NEB on its website on Tuesday.
Oil- by- r ai l s hipments have been climbing steadily in recent months, from a l ow of 43,305 bpd l ast June, and analysts expect the trend to continue in the coming months as Canadian oil production is close to surpassing export pipeline capacity.
“You have a lot of volume building,” IHS Markit director Kevin Birn said of the steadily rising rail shipments.
IHS published a study in April that showed Canadian oil exports would exceed export pipeline capacity this year but said it’s not clear whether that point has been reached.
The oil- by- rail data, Birn said, “is signalling it’s coming.”
Canadian oil exports to the U. S. reached a record high of 3.5 million bpd at the end of 2016 and could reach 4.8 million bpd by 2020, according to IHS. The report shows pipeline exports are operating near capacity now but companies have proposed projects that could move an additional 2.9 million bpd.
Birn said oil producers and infrastructure companies have significantly increased their oil- by- rail capacity in recent years because construction takes months, and the capacity can be quickly scaled up, rather than the years required to build a new pipeline.
There is currently enough rail terminal capacity to move 1.1 million bpd out of Western Canada, said Canadian Energy Research Institute vice- president, re- search, Dinara Millington said in an email.
She said the recent surge in oil- by- rail exports are the result of rising crude production, a lack of pipeline capacity and some industry seasonality.
CERI has also forecast that domestic oil exports would outstrip U. S.- bound pipeline capacity by the end of this year and “starting in 2018- 2019, without additional pipeline capacity, the crude exports will be locked in and will have no market access.”
British Columbia’s Green party and the NDP agreed to an alliance this week to f orm a government that promised to “employ every tool available” to prevent Kinder Morgan Canada from building its proposed $ 7.4- billion Trans Mountain pipeline expansion project, which they said increases the chances of an oil spill on the West Coast.
That pipeline has created a division between Alberta, where Premier Rachel Notley vowed it would be built, and B. C. “Mark my words, that pipeline will be built,” she said.
Entrenched e nvi r o nmental opposition in B. C. has also resulted i n Enbridge Inc.’s Northern Gateway pipeline project being denied upon second review by the federal government.
Notley has e xpressed her support for the Trans Mountain expansion and TransCanada Corp.’ s proposed Energy East project to New Brunswick to diversify her province’s exports away from the U. S., which is itself a large oil producer thanks to the growth of shale plays.