Canadian oil producers turn to trucks
Trucks travel up to 800 km as crude supply glut grows
The highways of Saskatchewan show just how desperate Canadian oil producers are to get their crude to market.
Tanker trucks laden with oil are journeying almost 800 kilometres to pipeline and rail terminals.
It’s a phenomenon that Ken Boettcher, president of Three Star Trucking Ltd. in Alida, Sask., started to see three or four months ago when oil shippers around Kindersley, near the Alberta border, began requesting trucks to move their crude, in some cases, as far south as North Dakota.
“It’s never been a common practice before,” he said in a phone interview. “They can probably buy it cheaper and bring it down here and blend it.”
Canada’s pipeline bottlenecks are pushing Canadian crude prices to the lowest in at least a decade, which has made shipping oil by truck more
cost effective.
At Hardisty, Alta., heavy Western Canadian Select sold for $52.40 (U.S.) a barrel less than West Texas Intermediate crude futures earlier this month, the biggest discount in Bloomberg data going back to 2008.
Almost 230,000 barrels of crude were exported by truck in August, the most in data going back to January 2015, according to data provided by Statistics Canada. Every month since December, more than100,000 barrels have been exported by truck.
A typical tanker truck can carry about 250 barrels of oil, Boettcher said. Hiring a truck to ship crude from the Permian basin of West Texas to Houston, a distance of almost 800 kilometres, costs about $15 a barrel one way, or double that if the tanker returns empty, said Sandy Fielden, director of research for the commodities group at Morningstar Inc.
Pipeline constraints in Canada, combined with a surge of new oilsands production, have created more demand for oil trucks.
One export pipeline, Enbridge Inc.’s Line 3, is scheduled to be expanded by late next year, but other projects continue to face delays, including the planned expansion of the Trans Mountain pipeline to the British Columbia coast.
As bottlenecks have worsened, crude shipments by rail have gradually picked up. A record 229,544 barrels a day were exported on trains in August, National Energy Board data shows.
But the rise in crude-by-rail exports has been limited as rail companies demand long-term agreements at fixed volumes. Some oil producers may be turning to trucks out of reluctance to “essentially submit” to the terms of rail companies, Fielden said.