Seeking Alpha

Crude-by-rail shipments from western Canada seen tripling in next two years

  • Shipments of crude oil by rail from western Canada are expected to more than triple in the next two years to ~700K bbl/day in 2016 from 200K in late 2013 amid a severe shortage in pipeline capacity, according to the annual forecast from the Canadian Association of Petroleum Producers.
  • Rail transportation is widely regarded as more dangerous than pipelines, but oil trains can be ramped up fast in response to market demand because they are not as regulated as pipelines.
  • Oil supplies in western Canada from the oil sands and from new shale plays continue to increase, while four major pipeline projects - Keystone XL (TRP), the TransMountain expansion (KMI, KMP), Northern Gateway (ENB) and Energy East - await regulatory approval and construction.
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Comments (28)
  • HumbleViking
    , contributor
    Comments (10) | Send Message
     
    Which railroad(s) will be moving this oil?
    10 Jun 2014, 11:21 AM Reply Like
  • jdstanec@msn.com
    , contributor
    Comments (19) | Send Message
     
    My question also, which railroad, which tanker car mfgrs. will get all this action?
    This is precisely the type of actionable news that should present an individual investor with at least a chance to beat the indexes on at least one play!
    10 Jun 2014, 11:47 AM Reply Like
  • metal27
    , contributor
    Comments (502) | Send Message
     
    Rail car manufacturers--GBX, TRIN, RAIL among others. All are making good moves but you are not too late to the party, I believe. I won GBX because they also build barges, and have just announced a JV to repair/upgrade tank cars.

     

    10 Jun 2014, 12:52 PM Reply Like
  • Robert Rapier
    , contributor
    Comments (87) | Send Message
     
    "My question also, which railroad, which tanker car mfgrs. will get all this action?"

     

    American Railcar Industries, Inc. (NASDAQ:ARII) as well. I put a Buy recommendations on ARII in March 2013. The 12 month return on this one is 92%.
    10 Jun 2014, 01:54 PM Reply Like
  • kata
    , contributor
    Comments (687) | Send Message
     
    Great call..
    10 Jun 2014, 03:23 PM Reply Like
  • cyberclark
    , contributor
    Comments (79) | Send Message
     
    I really doubt that! Zacks stock news reports that it costs 5 times more to ship rail than  it does pipeline. Let's follow that.

     

    Zacks tell us Alberta is paying between 2.50 and 2.00 per bbl of oil to ship rail That means Alberta is paying .40 or .50 cents a barrel to ship by pipeline. They allowed Kinder Morgan to rip off the industry with higher pipeline charges on their new line!

     

    Going by memory the rail has not gone two years straight without a derailment of some kind in western Canada.
    10 Jun 2014, 11:33 AM Reply Like
  • kata
    , contributor
    Comments (687) | Send Message
     
    That may or may not be true but the Obama Admin has said it wants to keep 2/3 of all known fossil fuels in the ground so counting on pipeline approvals and construction schedules is a lot riskier than betting on adding rail cars and barges. And that's TRN.
    10 Jun 2014, 01:38 PM Reply Like
  • Robert Rapier
    , contributor
    Comments (87) | Send Message
     
    "Zacks stock news reports that it costs 5 times more to ship rail than it does pipeline."

     

    It is more expensive, but if the pipelines are jammed and the differentials are high, they will still ship it. That's why Bakken oil by rail went from near zero to 700,000 bpd in about 3 years.
    10 Jun 2014, 01:52 PM Reply Like
  • John Rhodes
    , contributor
    Comments (868) | Send Message
     
    5x is bologna.

     

    Rail adds about $10-15 per barrel and pipeline adds about $5 per barrel.

     

    Rail is more expensive but more flexible, less regulation, more convenient in new locations, faster set up.

     

    Ultimately, both rail and pipelines win...
    10 Jun 2014, 03:25 PM Reply Like
  • tealone
    , contributor
    Comments (292) | Send Message
     
    Let capitalism work here, allow more pipelines to be built and producers will find the cheapest. Competition has always been the best defense against unreasonable prices.
    11 Jun 2014, 03:19 PM Reply Like
  • Street Instincts
    , contributor
    Comments (98) | Send Message
     
    Tell me about it. It amazes me how quickly gas stations around me adjusted to the Costco price. Shows they have quite a bit of wiggle room.
    13 Jun 2014, 09:51 AM Reply Like
  • delprice
    , contributor
    Comments (867) | Send Message
     
    Check out CXUSF
    10 Jun 2014, 11:46 AM Reply Like
  • RWMostow
    , contributor
    Comments (1513) | Send Message
     
    All-

     

    Wouldn't the railroad to benefit the most be BNSF?

     

    -rwm
    10 Jun 2014, 12:07 PM Reply Like
  • Robert Rapier
    , contributor
    Comments (87) | Send Message
     
    "Wouldn't the railroad to benefit the most be BNSF?"

     

    This is definitely true out of the Bakken. Warren Buffett also said a couple of years ago that they can gear up and transport a lot of oil out of the Athabasca as well.
    10 Jun 2014, 01:51 PM Reply Like
  • jdstanec@msn.com
    , contributor
    Comments (19) | Send Message
     
    Is BSNF not a public company (can't find the ticker), subsumed by Brk?
    See some refs to "Berkshire Energy", can that be traded w/o jumping into the whole empire? With all the tax breaks/poliitical influence & "Oracle" status that Buff enjoys, that may (if investable) may be a good long term shot...
    10 Jun 2014, 02:29 PM Reply Like
  • Robert Rapier
    , contributor
    Comments (87) | Send Message
     
    "Is BSNF not a public company (can't find the ticker), subsumed by Brk?"

     

    Correct.
    11 Jun 2014, 11:47 AM Reply Like
  • jdstanec@msn.com
    , contributor
    Comments (19) | Send Message
     
    Best non BRK SINGLE non pipeline play in the space is ???
    13 Jun 2014, 09:50 AM Reply Like
  • mydogmoe
    , contributor
    Comments (597) | Send Message
     
    Bufffett is one of Obama's advisors and financial supporters. His lobbying against the Keystone pipeline has nothing to do with the environment (which he and the administration will claim) and everything to do with the fact that Berk/Hath owns BN. BN transports the vast majority of the Canadian oil. This is a virtual gold mine for Buffet.....
    10 Jun 2014, 02:01 PM Reply Like
  • kata
    , contributor
    Comments (687) | Send Message
     
    Buffet is a smart cookie, lol
    10 Jun 2014, 03:23 PM Reply Like
  • Drew Robertson
    , contributor
    Comments (345) | Send Message
     
    The vast majority of Canadian oil goes by pipeline and by CN and CP. BNSF has major interchanges with both but most of BNSF's oil comes from the States. http://bit.ly/1oK6Sy0
    Clicks Chemicals
    10 Jun 2014, 04:18 PM Reply Like
  • mydogmoe
    , contributor
    Comments (597) | Send Message
     
    We have conflicting information. BNSF controls most of the routes when it enters the US system and BNSF carries the crude the most miles in the continental US.
    10 Jun 2014, 06:41 PM Reply Like
  • mydogmoe
    , contributor
    Comments (597) | Send Message
     
    Also Drew, your chart apparently is reporting intermodal traffic and I am quite sure oil is by tanker cars and should be considered car loads...
    10 Jun 2014, 06:44 PM Reply Like
  • SWBanks
    , contributor
    Comments (252) | Send Message
     
    I have to agree. BNSF is making a killing out here in the Bakken. Riding by their oil yard in Williston when they're assembling a train is a trip! Incidentally, one of the biggest problems here in the Bakken is lack of pipeline capacity, especially for the gas. We flare so much you can see the Bakken from space.

     

    Rich Kinder should consider buying a President.
    11 Jun 2014, 04:12 AM Reply Like
  • Drew Robertson
    , contributor
    Comments (345) | Send Message
     
    Click on Chemicals which includes Petroleum
    11 Jun 2014, 10:39 AM Reply Like
  • kata
    , contributor
    Comments (687) | Send Message
     
    He's already bought.
    11 Jun 2014, 02:34 PM Reply Like
  • booroy2
    , contributor
    Comments (100) | Send Message
     
    Just a few billion barrels of reasons we should never have elected Obama in the first place!
    10 Jun 2014, 02:09 PM Reply Like
  • kevin_brey
    , contributor
    Comment (1) | Send Message
     
    Canadian oil would be carried by Canadian National or Canadian Pacific. I'm not sure which has a line to Kitimat.
    11 Jun 2014, 06:32 PM Reply Like
  • Drew Robertson
    , contributor
    Comments (345) | Send Message
     
    CN goes to Prince Rupert
    12 Jun 2014, 09:25 AM Reply Like
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