RE:RE:Is it more expensive to ship oil by rail then via a pipelineIt is not necessarily more expensive to ship by rail, from my April 7
th article on SA:
Unit Train vs. Pipeline Economics
After an extensive study, ICF international, a well respected industry research organization (ICF was consulted by the state department as part of its evaluation of Keystone)
concluded the following:
The results indicate that shipment of bitumen via pipeline from Hardisty/Lloydminster will cost $18.38per barrel (BBL) for volume shipped on a committed basis, and $25.30/bbl for volume shippeduncommittedThese are costs on a bitumen equivalent basis although the crude would be shipped inthe form of dilbit, which is comprised of 70% bitumen and 30% diluents .
Rail movements of raw bitumenfrom Hardisty/Lloydminster to Port Arthur refineries or Houstonrefineries are estimated as $17.76/bbl and $19.18/bbl, respectively (assuming heated barges from a Port Arthur rail offloading facility). Meanwhile, rail movements of "rail bitumen" or "railbit" (15%diluent/85% bitumen) to these refineries are $21.69 /bbl and $23.27/bbl of bitumen, respectively.
Consequently, the results of this analysis indicate that bitumen movement by pipeline on a committed basis is roughly equivalent to rail movement costs.
The above conclusion is similar to the conclusion reached by Raymond James in May 2013 and shared by Canexus:
Torq Transloading, another key Canada to the US bitumen transporter has also argued that transporting raw bitumen through unit trains is cheaper than moving bitumen (dilbit) through pipelines,
from Torq:
Those various data points seem to argue that the construction of pipelines will not necessary curtail bitumen by rail transport. As a matter of fact, on April 2nd an Enbridge official
admitted the following:
"Rail has proven to be very successful in getting [barrels to] some of these refineries on the East and West coasts that are not well accessed from pipeline, and we have now concluded that pipelines are probably never going to get those barrels back"...
"The rail business has captured some market that they are going to keep for the long term." ... "Pipeline capacity is not keeping up with the potential production outlook"..."
It's going to be a few years before the pipeline capacity takeaway matches up with the supply curve."
Thus in light of the rail's price advantage in certain circumstances and the continued lag in pipeline construction, oil sands producers will be well served to increase their shipments by rail both as a risk mitigation measure and an economic management measure. Hence, NATO will likely be fully utilized over the next 3-5 years and likely heavily utilized for many decades to come.
https://seekingalpha.com/article/2128073-canexus-corporation-positioned-for-a-30-percent-rebound
Also, earlier this week, Peters & Co. came with research confirming my conclusion that rail is cheaper for uncommitted shippers.
Regards,
Nawar