Category Archives: Canadian refineries

Canadian province of Alberta leases 4,400 rail cars – enters crude by rail business

Repost from Reuters

UPDATE 2-Canadian province of Alberta leases 4,400 rail cars to clear oil glut

By Rod Nickel, February 19, 2019 / 12:06 PM

WINNIPEG, Manitoba, Feb 19 (Reuters) – Canada’s oil-producing province of Alberta has leased 4,400 rail cars in a multibillion-dollar move to clear a glut of crude that depressed prices, Premier Rachel Notley said on Tuesday.

Notley said Alberta would start putting cars into service in July so it can buy and sell oil itself. Canadian National Railway Co and Canadian Pacific Railway Ltd will haul a combined initial volume of 20,000 barrels per day that will reach 120,000 bpd by mid-2020.

Alberta’s rail investment is part of a rescue package for an oil industry struggling with high costs and the exit of some foreign majors. Pipelines have become congested because of environmental opposition that has stymied expansion.

The provincial government took the rare step in January of ordering oil production cuts.

“Rather than produce less, we have to find ways to move more,” Notley said in Edmonton.

The three-year plan will cost Alberta C$3.7 billion ($2.80 billion), consisting of buying oil, leasing cars and purchasing rail and loading services. Alberta expects to earn gross revenues of C$5.9 billion ($4.5 billion) from reselling oil and higher royalties to produce net revenues of C$2.2 billion.

Shares of CN and CP gained nearly 1 percent in Toronto. CN expects to handle 60 percent of Alberta’s barrels, Chief Executive J.J. Ruest said in a statement.

The Alberta government said in November, when Canadian oil fetched near record-large discounts to U.S. oil, that it was seeking train capacity. It has also provided incentives for petrochemical and partial-upgrading plants.

Canadian crude-by-rail volumes hit record highs last year, but declined in 2019 after production cuts made rail shipments less economic. Imperial Oil said it was forced to cut its own rail shipments to “near zero,” illustrating the potential for unintended consequences when governments intervene.

Economic conditions were already improving for rail shipments, Notley said.

Rail shipments are seen as a relief valve for oil when pipelines are full, but they are generally more expensive and less safe. A CN oil train derailed on Saturday in Manitoba.

Notley’s New Democratic Party government faces a stiff spring election challenge from the United Conservative Party (UCP). UCP energy critic Prasad Panda said the party was reviewing the rail plan.

Three-quarters of the cars will be the DOT-117J model, featuring thicker steel than some types. The rest will be DOT-117R cars retrofitted to meet some DOT-117J standards, but a type that BNSF Railway Co is phasing out after a derailment in Iowa last year. ($1 = 1.3205 Canadian dollars)

(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Chizu Nomiyama and Peter Cooney)
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    U.S. exporting more crude oil to Canada

    Repost from Bloomberg Business News

    Canadian Refiners Set to Buy More U.S. Oil With Wider Discount

    By Robert Tuttle, March 18, 2015 4:14 PM PDT 

    (Bloomberg) — Cheaper North American oil is poised to replace West African and Middle East cargoes at eastern Canadian refineries with U.S. crude prices at the lowest level compared with the international benchmark in 14 months.

    Imports to Canada from outside North America averaged 244,089 barrels a day this month through March 15, down 27 percent from a year earlier, according to New York-based ClipperData, which tracks tanker shipments.

    Canada, the world’s fifth-largest oil supplier, produces most of its oil in the western province of Alberta and exports it south to the U.S. A lack of pipelines means Canada’s eastern refineries depend on imports by tanker and train.

    U.S. export “volumes have been growing pretty exponentially,” Katherine Spector, a commodities strategist at CIBC World Markets Inc. in New York, said by phone Wednesday. U.S. oil is “going to Eastern Canadian refineries and displacing waterborne light crude.”

    U.S. crude oil exports averaged 478,000 barrels a day the week ended March 13, up almost eightfold from a year earlier, preliminary data from the Energy Information Administration show. Canada, the only country that U.S. producers can export to without restrictions, receives the bulk of the shipments.

    Oil has flowed north as West Texas Intermediate crude’s discount to Brent averaged $9.43 a barrel this month from $2.41 in January as U.S. stockpiles rose to a 458.5 million barrels, the most in decades.

    The U.S. displaced Algeria in 2013 as Canada’s biggest source of imported oil and accounted for about half of imports in the first eight months of last year, the country’s National Energy Board said in a November report. The trend was driven by availability of tight oil from North Dakota as well as Texas, New Mexico and Colorado.

    Bakken crude from North Dakota traded at about $40 a barrel today versus $55 for oil from West Africa, according to data compiled by Bloomberg.

    “Especially with lower prices, a difference of a dollar or so in transport costs is significant,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone Wednesday. “If you can bring it in from the U.S. rather than West Africa, it’s a little closer and cheaper.”

    Expanded rail capacity has linked U.S. oil producers with Canada, Spector said. The movement parallels the movement of Bakken crude to U.S. East Coast by rail, which cut the region’s imports of crude from Nigeria by half in two years and from Algeria by 81 percent, EIA data show.

    “The maritime provinces of eastern Canada do resemble the U.S. East Coast in many ways,” Antoine Halff, head of the International Energy Agency’s oil industry and markets division, said in a March 18 phone interview. “When Bakken crude started being railed to the U.S. East Coast in significant quantities, it displaced imports from West Africa.”

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