CN to build Manitoba rail-loading facility
30,000 bpd facility scheduled to be up and running by Q2 2013
Canadian National Railway Co., Canada’s largest railway company, agreed today to build a crude oil rail-loading facility near Cromer, Manitoba, with Tundra Energy Marketing Ltd.
The terminal, expected to be operational in the second quarter of 2013, will initially load 30,000 barrels of crude oil per day on to rail cars, CN said in a statement. That’s the equivalent of 50 tank cars’ worth, the company said, noting that unit trains of 100 tank cars could also be accommodated.
CN said it expects to transport more than 30,000 carloads of crude oil in 2012 and could double that next year.
Oil producers have turned in greater number to rail cars to transport crude oil to market as a hedge against pipeline disruptions, Barclays Capital said in a report this week.
“Increasingly, Canadian companies are viewing rail as part of a risk management strategy (much like hedging), which is designed to provide diversification, rather than necessarily an avenue to drive higher profits,” the bank said.
“Indeed, our understanding is that the rail market is sufficiently liquid today to support companies shifting between pipeline and rail on a monthly basis to secure the strongest pricing.”
Such is the strategy pursued by Baytex Energy Corp. The Calgary-based company has secured term contracts for both pipeline and rail transportation for 40 per cent of its fourth-quarter heavy oil output (22 per cent on pipeline, 18 per cent on rail), it said in an October presentation to investors.
Baytex, which expects to produce an average of 54,000 barrels per day of oil equivalent this year, said the volume of crude it shipped on tracks in September declined, however, as tighter heavy differentials squeezed rail economics.