Page 5 - NorthAmOil Week 47

NorthAmOil COMMENTARY NorthAmOil
warned that if the strike continued, it could result in a temporary shutdown of its Redwater olefinic fractionator facility.
On November 24 it was reported that two crude-by-rail terminal operators, TORQ Energy Logistics and Altex, would be unable to receive any more deliveries at some of their terminals once all empty rail tankers were filled up.
The situation has now been eased and clo- sures averted, assuming Teamsters’ deal with CN is voted through, but the warnings illustrate the vulnerability of Canada’s energy industry to disruptions in takeaway capacity.
Under pressure
The strike came at a time when Canadian pro- ducers were already under considerable pressure, thanks to a two-week outage on the 590,000 bpd Keystone pipeline, which carries Alberta crude to the US, following a spill in North Dakota.
The Keystone outage added to a glut of Western Canadian crude struggling to reach its markets as the industry awaits the construction of new – and considerably delayed – pipeline capacity. Alberta’s United Conservative Party (UCP) government has being trying to address this glut, and had recently extended produc- tion limits brought in by the previous provin- cial government by another year, to the end of 2020. The government cited uncertainty over the timetable for new pipelines coming online when it announced its decision in late August. However, in early November Alberta’s govern- ment unveiled plans to ease output curtailments for producers that ship more of their oil by rail. Some producers, including Cenovus Energy, immediately announced plans to ramp up production in response to the provincial deci- sion to ease curtailments for those stepping up
crude-by-rail use.
Had the strike continued, it would have
threatened to undermine the impact of this move, instead exacerbating the glut further still and potentially forcing producers to rein in output.
Adding to the challenge was the fact that the strike also coincided with crop harvests, mean- ing that competition for rail capacity was height- ened among commodity producers.
“The issue becomes prominent very quickly in terms of oil backing up into storage,” a Gen- scape analyst, Mike Walls, was quoted by Bloomberg as saying. “Western Canada is so sensitive to any takeaway disruptions.”
Not all companies were equally affected by the strike, however. Those more shielded from its impact included Imperial Oil, which ships most of its crude-by-rail volumes on Canadian Pacific Railway (CP). Imperial owns one of the largest rail terminals in Western Canada, near Edmonton in Alberta. CP also serves USD Group and Gibson Energy’s Hardisty terminal, while Cenovus’ Bruderheim facility is served by both CP and CN.
While the industry waits for the end of the strike to be formalised, it may be forced to con- sider how it can go about securing as much reliable takeaway capacity as possible. There are unlikely to be easy answers here, given the unpredictable factors that have disrupted take- away capacity out of Western Canada in recent weeks. What is clear, though, is that rail looks set to play an increasingly important role in Canadian takeaway capacity in the short – and potentially medium – term as new pipeline plans continue to be beset by delays. For those produc- ers wanting to ramp up crude-by-rail shipments, the end of the strike will be very welcome.™
In early November Alberta’s government unveiled plans to ease output curtailments for producers that ship more of their oil by rail.
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