CBR Back In The News -- Big Story Of The Month? -- June 29, 2017

Note: yesterday I noted that CNI, CP, and Greenbrier all hit new 52-week highs. Hold that thought. See below.

Active rigs:

$45.31	6/29/2017	06/29/2016	06/29/2015	06/29/2014	06/29/2013
Active Rigs	59	30	77	191	189

RBN Energy: Canadian Congestion Revives Cushing Rail Option.

New production expected online in December 2017 from the Suncor Fort Hills project in the oil sands region of northern Alberta could increase pipeline congestion from western Canada to the U.S. Gulf Coast market where the oil is in demand. That’s because existing capacity across the Canadian border is running close to full and the only possible capacity addition across before 2019 is Enbridge’s 300-Mb/d Alberta Clipper expansion at the border — assuming it gets a long-sought U.S. Presidential Permit later this year.

As a result of this continuing near-term pipeline squeeze, producers are again turning to rail transport to bypass pipeline congestion and ensure their crude gets to market. On June 2 (2017), USD Group announced a new route option for Canadian producers following its purchase of a rail terminal in Stroud, OK, that is connected by pipeline to the Midwest crude trading and storage hub at Cushing, OK; USD will offer direct rail service from its Hardisty, AB, terminal to Cushing. Today we review the economics of this rail transport route for oil sands producers.

Pipeline pinch. From Bloomberg via Rigzone -- Pipeline Pinch Adds to Oil-Sands Woes as Keystone Wait Drag.

Call it the pipeline pinch, or maybe the Keystone quagmire.

While plans by Canadian companies from Suncor Energy Inc. to Canadian Natural Resources Ltd. to boost oil output are racing to fruition, the construction of three pipelines needed to move that product to market, including the infamous Keystone XL, is lagging years behind.

The end result: Producers have little choice but to move those extra barrels by train, with costs two to three times higher than pipeline shipping. It’s an unwelcome added expense after oil plunged about 20 percent from this year’s peak. Futures prices have settled in below $45 a barrel, after many predicted it would rise to $60.

“We’re not going to see significant new pipeline capacity until late 2019 or 2020,” said Nick Schultz, vice president for pipelines and regulatory matters at the Canadian Association of Petroleum Producers. In the meantime, the extra expense for shipping “impacts royalties and other things that impact the public.”

During the Barack Obama administration, oil-sands producers feared a future when they would have to rely heavily on costly railway shipments if he didn’t approve Keystone XL. That may start this year.

Pipelines in Western Canada, which holds the world’s third-largest oil reserves, can carry about 3.3 million barrels of crude a day, according to CAPP. Meanwhile, the area is expected to produce 3.92 million barrels a day this year and 4.2 million next year as a number of large oil-sands projects come online.

The looming bottleneck adds a new urgency to the industry’s calls for more capacity and may lend credence to its argument that the lack of lines hurts the nation’s economy.

Much more at the link.