The Premier of Aberta is discussing purchasing 7,000 new oil tank cars and 80 locomotives to ship oil out of Alberta as there are no new plans for pipelines.
Gonna try to provide some more info without getting political.
There have been, and still are multiple plans to build additional pipeline capacity out of Alberta but all have gotten caught up in bureaucratic red tape or court challenges (some have been cancelled or denied regulatory approval), and so far only Enbridge's Line 3 replacement and expansion (Hardisty, AB to Superior, WI) has made substantial construction progress.
Alberta's oil production capacity has increased substantially over the past 15 years as multiple major projects have been completed, but the pipelines they were supposed to feed have not been built. The effect is that Alberta oil has become landlocked, with little to no easy access to world (or even eastern Canadian) markets. This has resulted in Alberta oil selling at a much reduced price to our one accessible customer: American refineries set up to process heavy oil.
As of today Alberta oil is selling for approximately $10/barrel on the spot market, $40/barrel less than the world price. The big producers who also own refineries and can negotiate better long-term contracts are not affected as badly, but many smaller producers are currently operating in the red or barely breaking even.
Alberta is also due for a provincial election next year, and the current New Democratic Party (centre-left) government is highly unpopular, in large part due to their perceived lack of action on the economy and pipeline front.
The reduced price of oil has also meant that the province is not collecting anywhere near as much in royalties as they should be, which has contributed to our ongoing budget defecits and growing provincial debt (but that's a political story for another time and place).
Greetings from Alberta
-an Articulate Malcontent
SD70DudeAs of today Alberta oil is selling for approximately $10/barrel on the spot market, $40/barrel less than the world price.
You mean almost $25 under CCI?
Is that in part some difficulty in obtaining the necessary diluents to getting Alberta "bitumen" into sufficient shape for shipment?
I have not yet run through the reason for the recent spike in CCI (it went up suddenly and massively about Nov. 30) -- perhaps that is related to some aspect of prospective railroad transportation. There are some interesting prospective markets for this feedstock, some quite distant from Alberta, once there is an effective method of transporting it to 'tidewater'...
Maybe instead of a bunch of pipelines and/or rail cars, build a refinery or two that can deliver the finished product to Albertan as well as other Canadian consumers. Why must we be hewers of wood and carriers of oil? Lets refine here for our own use.. here.
Ulrich Maybe instead of a bunch of pipelines and/or rail cars, build a refinery or two that can deliver the finished product to Albertan as well as other Canadian consumers. Why must we be hewers of wood and carriers of oil? Lets refine here for our own use.. here.
Just this year the first new Canadian refinery in over 30 years opened northeast of Edmonton. The Alberta government was a partner in its construction, but it may not turn out to have been a good business decision:
https://nwrsturgeonrefinery.com
https://globalnews.ca/news/4301514/north-west-redwater-sturgeon-refinery-university-calgary-livingston/amp/
More recently the province has been using royalty credits as an incentive to encourage chemical processing and manufacturing. The first project to take advantage of this is a $3.5 billion polypropylene plant:
https://www.google.ca/url?sa=t&source=web&rct=j&url=https://www.alberta.ca/assets/documents/energy-petrochemical-diversification-factsheet.pdf&ved=2ahUKEwjbj8LRuYffAhXNMd8KHXuyBwEQFjABegQIExAE&usg=AOvVaw20JuhWfCN6b4uI87F2LWZV
http://www.interpipeline.com/operations/constructionprojects/heartland-complexcfm.cfm
Overmod Is that in part some difficulty in obtaining the necessary diluents to getting Alberta "bitumen" into sufficient shape for shipment?
One of the side effects of the fracking boom in the liquid-rich formations in northwestern Alberta and northeastern British Columbia is that there is no shortage of diluent feedstock out here.
There is a large rail terminal at Clover Bar (on the former Celanese Canada plant site) in east Edmonton dedicated to receiving diluent by tank car, presumably from the various pipeline destinations in the U.S. It is then sent in its own dedicated diluent pipeline to the various plants.
Operating a refinery certainly adds value to the product, and if the products can be used locally it seems to be a win-win. However, if the products are not used locally, then you have a new set of problems. There is a reason for the business model of building refineries near the point of distribution, often population centers. Crude can be transported to refineries as a commodity, usually thru pipelines. The refinery produces a diverse stream of products, to both downstream industries (e.g. petrochemical plants) and consumers. You have to take into account the transportation costs of multiple products thru diverse modes such as pipeline, tank car, tank truck, and even drums, most which are less efficient than simply shipping crude oil in bulk.
It will be interesting to see if the delivery of these cars and locomotives occur while the market may still require them, or, if in typical industry fashion, the cars arrive adn teh market has changed and there is a car surplus.
An additional problem is that the railroads need crews to to move them, something that is again in shot supply on CN and CP as they head into winter, even as they added locomotives and track to their networks.
tatans The Premier of Aberta is discussing purchasing 7,000 new oil tank cars and 80 locomotives to ship oil out of Alberta as there are no new plans for pipelines.
Rio Grande Valley, CFI,CFII
I suspect the talk of new railcars and locomotives is purely political and will never happen. As far as I know, no order has been placed; it's all just been talk (and lots of it). For some further context, note that the federal government (Justin's Liberals) not only approved a new pipeline to Vancouver, they bought it for $4.5 billion when the private-sector owners got cold feet and pulled out. But, there is stiff opposition to this pipeline in BC, and construction has effectively been stalled by a Supreme Court ruling that found the federal government did not uphold its constitutional obligation to consult with all affected indigenous groups.
There is a provincial election coming up in Alberta early this year, and the governing party (NDP) is desperate. The party has never been popular in Alberta. They won only because the conservative party that had ruled the province for decades broke up and the two rival parties that emerged split the conservative vote, allowing the NDP to sneak in the back door. The conservatives have now re-united, and the election outcome looks to be a foregone conclusion. The talk of railcars is simply an attempt on the NDP's part to look like they're doing something, and also perhaps a message to BC that the oil is bound to move through the province to Vancouver one way or the other and would you really prefer trains to a pipeline? Meanwhile, the feds are scrambling to hold the required consultations so they can get the pipeline back on track, but it won't come in time to save the Alberta NDP government (which, to be fair, can only do so much and is mostly blameless for the way the pipeline issue has played out). Albertans have good reason to be worried; they rely heavily on oil and gas revenues to help cover their provincial budget, which is the main reason their taxes are so much lower than most other provinces.
Meanwhile, Team Trudeau is between a rock and a hard place. Their long-promised national carbon pricing scheme comes into effect this year, and their approval of the pipeline was positioned as a reasonable and necessary trade-off for that. They have also correctly identified that the implication of the Supreme Court ruling goes beyond just this one pipeline, and that they absolutely must demonstrate that big infrastructure projects are still possible in Canada. But, on the other hand, one of their major campaign promises and governing priorities has been to improve relationships with and treatment of Canada's indigenous people. While some would argue they've made some progress on that, most would agree that their success has hardly been overwhelming or complete. So, this is a tough one for them, and they are up for re-election in October.
Politically, 2019 will be an interesting year for Canada.
A lot of turmoil coming up. My plan is to just keep it together and do a lot of observing, between the lines and outside the lines.
Yep, all talk and no action so far. But Alberta's petroleum marketing commission is currently in talks with the railways, so we'll see what happens.
Are there any suitable tank cars available for lease?
I guess nobody but CN is serious about encasing the Alberta tar into polymer pucks that would be cheaper to transport than either tank cars or pipelines. Those could be shipped in gondolas, and there is, from what I've seen, a glut of coal gondolas resulting from coal ower plants shutting down. The expense would be in facilities at either end to form the pucks (about the size of a large bar of soap) at the shipping end and to refine them at the receiving end (and to dump them out of the cars). The polymer encasing the tar would be less volatile and easier to separate--and recycle--than the diluent that's currently used. And guess what--if there's a wreck, the pucks float!
Carl
Railroader Emeritus (practiced railroading for 46 years--and in 2010 I finally got it right!)
CAACSCOCOM--I don't want to behave improperly, so I just won't behave at all. (SM)
CShaveRRI guess nobody but CN is serious about encasing the Alberta tar into polymer pucks that would be cheaper to transport than either tank cars or pipelines.
OK, until reading further to find that the "pucks" would be relatively small, my mind's eye saw something akin to the coil steel in gons loads that frequently go west through Tehachapi on BNSF. Kind of a humorous image, in any event.
CN is currently looking to build a $50 million pilot plant for the Canapux project:
https://www.cbc.ca/amp/1.4960173
https://www.cninnovation.ca
If the pucks work out, there could be markets made in other locations with transloading to ships. Would Alberta oil be able to move from Prince Rupert to places in the Far East such as Japan, or from Montreal to Europe or Africa?
The technology could be deployed anywhere there are deposits of heavy oil that requires heat to make it flow.
Oil is still going to be used as the primary fuel for transportation for many decades to come - the Canapux could open new markets for not only Alberta tar sands oil but also for any heavy oil deposits to which a rail spur could be built.
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