Thursday, May 14, 2009

CN: Ship by rail, not by pipe

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Oilsands companies in Canada’s Alberta Province will save billions of dollars while helping smaller in situ oilsands projects south of Fort McMurray get their product to market by shipping bitumen in CN tank cars rather than through the proposed Gateway pipeline, the railroad says. The C$4 billion pipeline to Kitimat, which would be used to serve Asian markets, wouldn’t be needed.

cn-pipeline.jpg“We’re already [in Kitimat], and establishing a terminal would be the same for rail or pipelines,” Randy Meyer, CN manager of oilsands sales, told the Van Horne Institute’s transportation summit in Edmonton. CN’s “Pipeline on Rail” plan would not affect the railroad’s ability to move freight anywhere in North America, he said. By year-end 2009, CN projects shipping 10,000 barrels of bitumen a day from producers who aren’t
connected to a pipeline.

CN’s current volume of coal shipments from the six mines it serves is equivalent to transporting 210,000 barrels of oil per day, and represents just 5% of revenues. CN moves 130 trains a day in Western Canada, and adding 400,000 barrels a day of bitumen—the capacity of the Gateway pipeline—would be the equivalent of four to six new trains a day.

Meyer said that oil producers face a lower risk with rail, compared to building pipelines with 30-year contracts. “Putting terminals on a rail system is like adding peripherals to your computer,” he said. “You don¹t need a whole new system. And there is a commodity risk for producers who must supply the diluent (a solvent that allow the bitumen to flow and is later recovered). Because rail is scaleable, smaller facilities only pay for the freight service they need.” Opti-Nexen, for example, took a position on a pipeline for 60,000 barrels a day, but is only producing 15,000 now. “We are moving out some of their sulphur by rail, and there is no such long-term risk,” Meyer pointed out.

Aside from bitumen, Meyer said CN could move carbon dioxide and negate the need for expensive pipelines to carry it to deep disposal sites in central Alberta. CN already moves 220,000 tonnes of sulphur from Suncor annually to buyers in Florida, for example. “We are the largest mover of sulphur in North America, at 4.1 million tones a year, with 3.2 million tonnes of that in dry form, which goes to Vancouver for shipment,” he said. There’s an even bigger  opportunity in the Industrial Heartland region near Fort Saskatchewan. “We are planning, with a partner, a sulphur terminal in Prince Rupert,” Meyer said. “We would bring liquid sulphur from the Fort McMurray area and the Heartland to Prince Rupert, re-form it there, and put it on vessels for China or other places in Asia. It’s an economic way to get sulphur out of these areas [near
Edmonton and Fort McMurray]” CN currently is working on two other proposals for dealing with sulphur, Both seek to build sulphur reforming plants in the Edmonton region.