Crude by rail on pace to shatter records in 2019
The head of CP Rail says 2019 will likely be a record-breaking year for crude-by-rail transport at his company.
Earlier this week, CP Rail reported a 58% increase in revenues from its energy, chemicals and plastics division, boosting third quarter profits to a record high. Much of that increase was attributed to higher volumes of refined products and crude oil.
CEO Keith Creel says he is definitely seeing higher demand from producers in Western Canada. Crude oil transport volumes at CP jumped to 23,000 carloads in Q3, more than triple the same time last year. Creel says he thinks his company will likely deliver anywhere from 100,000 to 120,000 carloads in 2019, potentially topping record volumes from 2014.
Assuming 700 barrels per carload, that works out to a range of 190,000 to 230,000 bbl/day. Last month, competitor Canadian National Railway told investors they can expect about 70,000 carloads of crude to be shipped this year, roughly 135,000 bbl/day.
According to Statistics Canada, over 350,000 bbl/day of crude, fuel oil and refined products were transported on Canada’s rail network last July, already surpassing record highs from 2014.
Cenovus Energy struck a deal with both CN and CP to ship 100,000 bbl/day of crude from its Bruderheim rail loading terminal to the Gulf Coast . According to the National Energy Board, Canada exported a record 207,000 bbl/day of crude by rail to the US. About half of those volumes ended up in Gulf Coast, where Canadian heavy crude fetches much better market prices than in land-locked Alberta.
The party may be relatively short-lived, however, since pending pipeline expansions will eventually erode demand for crude carloads. CP says it is signing longer term contract with producers, and is working on diversifying its energy customer base to include liquefied petroleum gas and refined products.
CN Rail is due to report its third quarter results on October 23, 2018.