RBN Energy: CBR -- Canadian update
Canadian producers trying to get their crude to market have come under pressure from two directions at once. US regulators have extended the deadline to make a decision on the Keystone pipeline that would relieve ongoing pipeline congestion out of Western Canada. Canadian regulators have increased pressure on crude by rail development plans, designed to bypass pipelines, by implementing new standards for rail tank cars. With no other apparent alternatives and despite some delays, rail terminal development plans in Canada are proceeding. Today we detail the progress of rail unloading terminals that can handle heavy Canadian crude at the US Gulf Coast.
In the first episode in this series we distinguished between oil sands producers that are able to deliver their bitumen crude to market direct from the production plant as pipeline quality dilbit via feeder pipelines and smaller producers that mostly do not have that luxury.
We pointed out that it is often more convenient for small producers to deliver their crude by truck to rail terminals because of the overhead costs associated with blending up their crude to pipeline specifications and securing scarce capacity on pipelines out of Alberta.
However, we also noted that such small producers are unable to justify shipping their crude on unit trains of 100 cars or more even though doing so would achieve economies of scale. Until these smaller producers are able to ramp up production and invest in improved infrastructure, they are essentially price takers.
In the second episode we looked at the unit train rail loading options available to larger Canadian oil sands producers. We noted that the large terminals being built in Edmonton, Hardisty and Kerrobert are designed to carry pipeline quality dilbit. That means producers still have to pay the “diluent penalty” incurred by carrying up to 30 percent additional light hydrocarbons blended into bitumen crude to allow it to flow in pipelines. That reality will not change until railroad operators build diluent recovery units (DRUs) that can remove some or all of the diluent before loading crude onto tank cars – a prospect not expected to be realized until 2015.
The continued diluent penalty has not deterred the development of rail loading capability – reflecting the sense of urgency felt by producers unable to find adequate pipeline capacity to get their crude to the Gulf Coast markets where their heavy crude is in demand. It remains to be seen if the new Transport Canada tank car safety regulations will slow crude-by-rail development further. In this episode we review progress in building rail unload destination facilities.From readers:
Bloomberg is reporting:
Saudi Arabian Oil Co., the world’s largest crude exporter, raised differentials used in determining its official selling prices for all crude grades to customers in the U.S. by 80 cents a barrel each and increased levels for its two lightest blends to buyers in Asia for June.
The state-owned producer, known as Saudi Aramco, boosted the June premium for Arab Medium for U.S. buyers to $1 a barrel more than the Argus Sour Crude Index, from 20 cents over the benchmark for May, the company said today in an e-mailed statement. The premium will be the highest for the blend since April 2009, according to data compiled by Bloomberg.I'm not sure what to think of that, at the moment. It's too early, 6:25 a.m. Mountain Time. A huge "thank you" to Ed for sending me this link.
The Wall Street Journal -- more briefly than usual --
Putin eyeing Latvia?
Fear of wider effect on economy tempers sanctions.
This is a cool story: a USAF U-2 caused wide-spread ATC outage last week across four Western states.
Transfused blood rejuvenates old mice -- study. Isn't this called doping? Didn't Lance pay a high price fo this?
The Los Angeles Times
Target CEO resigns.