Alberta planning to buy rail cars to ship crude amid pipeline pinch


  • Corporate News
  • Friday, 30 Nov 2018

Rail assistance: Notley says buying two new unit trains could help transport an additional 120,000 barrels a day and help narrow the oil price gap relative to the US benchmark by around US4 a barrel. — Reuters

CALGARY: Alberta is working to buy rail cars to help ship more crude as pipeline bottlenecks have the oil-rich province grappling with historic low prices.

The province has engaged a third party to negotiate the purchases and a deal may be struck “within weeks,” Premier Rachel Notley said Wednesday in a speech in Ottawa.

The province’s costs would be fully recouped through royalties and the selling of shipping capacity, she said.

“Don’t mistake me – this is not the long-term answer,” Notley said.

“It absolutely is not. New pipelines are the long-term answer.”

Notley’s proposal is one of several put forward by government and industry officials to boost Canadian oil prices by increasing the amount that can flow to refineries in the United States and elsewhere. Some producers have begun to curb output – and asked the government to mandate cuts – after prices fell to as much as US$50 a barrel below the US benchmark.

Canadian Prime Minister Justin Trudeau took the unusual step of buying a pipeline project earlier this year to help get enough transport capacity.

The announcement comes about a month after Alberta asked the federal government to buy more locomotives.

The federal government was said not to favour that plan, and Notley has said in recent weeks that her administration may buy the equipment on its own.

Western Canada Select, a grade of crude produced by Alberta’s prolific oil sands, closed at US$13.46 a barrel earlier this month, the lowest on record in Bloomberg data stretching back to 2008. WCS’ discount to US benchmark prices widened to about US$50 a barrel last month, also a record.

Notley said buying two new unit trains could help transport an additional 120,000 barrels a day and help narrow the oil price gap relative to the US benchmark by around US$4 a barrel. — Bloomberg

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