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Wednesday 12

December, 201811:51 AM



Alberta to move oil by rail to cover pipeline capacity shortage

Alberta to move oil by rail to cover pipeline capacity shortage

Canada's oil-rich province of Alberta announced Wednesday it will purchase tanker cars to increase its oil exports by 120,000 barrels a day

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29.11.2018 09:43 AM

Canada's oil-rich province of Alberta announced Wednesday it will purchase tanker cars to increase its oil exports by 120,000 barrels a day, taking to the rails as environmental protests hold up construction of new pipelines.

The landlocked province sits on the world's third-largest oil reserve. But projects to get additional output to US Gulf coast refineries or to the Pacific tidewater for shipping overseas have stalled amid fierce legal and regulatory battles.

Alberta Premier Rachel Notley said in a speech to a Canadian Club luncheon in Ottawa that she hoped to close a deal to purchase the tankers "within weeks."

The new rail cars filled with crude oil would start rolling down tracks by the end of 2019, she said.

According to local media, Alberta is looking to buy 1,000 tankers, for about Can$3 billion (US$2.3 billion).

Notley noted that Alberta oil production had ramped up in recent years in anticipation of new oil conduits being built, but due to construction delays it now has an excess of 250,000 barrels per day going nowhere.

She blamed this glut in part for a steep discounting of Canadian oil, which was selling Wednesday at just over US$10 per barrel (Western Canadian Select), versus about US$50 for West Texas Intermediate oil.

"We cannot sustain a $10 a barrel price for Western Canadian Select," she lamented. "And that isn't going to be remedied until we get back to rail economics."

The Canadian economy is losing Can$80 million per day due to the unfavorable price differential, she said. 

Canada currently produces about 4.8 million barrels of oil equivalent per day, mostly heavy oil from the Alberta oil sands.

In just the last two years, Prime Minister Justin Trudeau's government has greenlit a major pipeline to the Pacific and a few smaller conduits, and rejected another to the west coast, while a proposal for a conduit from Alberta to Atlantic coast refineries was abandoned after intense protests.

In August, the federal government purchased the 1,150-kilometer (715-mile) Trans Mountain pipeline, effectively nationalizing it, and relaunched consultations with Pacific coast indigenous groups after a court ruled the tribes should get a say in the multi-billion project to move 890,000 barrels per day.

The tribes are worried that increased shipping from a marine terminal at the end of the route in Vancouver would impede the recovery of killer whale populations in the area.

The Keystone XL project to move Alberta oil to refineries in the US Gulf Coast, meanwhile, has once again been held up by US courts.
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