While the haggling continues over oil pipelines across North America and bottlenecks intensify in the U.S. mid-continent, Canadian Pacific Railway, or CPR, is in its fourth year of turning trains into a significant method of crude transportation.
The Calgary-based company, determined to build an edge on its rival Canadian National Railway, has been leading the way in shipping crude from the Bakken field in North Dakota and Saskatchewan.
It started at 500 rail cars in 2008, each holding 650 barrels (about 890 barrels per day), expanded to 13,000 cars last year (23,150 bpd) and is now targeting 70,000 cars (125,000 bpd) from the North Dakota Bakken alone.
With North Dakota production headed for about 600,000 bpd in six years, the volumes being carried by rail are significant and, in Canadian Pacific’s view, have the potential for even greater expansion.
Not waiting for XLThe U.S. State Department estimated that rail capacity in the region reached almost 300,000 bpd in 2011 as producers look for transportation options rather than waiting for a resolution of TransCanada’s Keystone XL problems.
CPR said earlier in March that it should start shipping crude this summer from a new 35,000 bpd terminal being constructed by Texas-based U.S. Development Group at Van Hook, N.D., 100 miles east of Williston.
The railway, which has exclusive rights to use the terminal, is making infrastructure improvements on its North Dakota network as part of a C$100 million investment on tracks in the U.S. Midwest.
The terminal will handle 15 crude unit trains per month initially and is expected to double that capacity.
Tracy Robinson, CPR’s energy and marketing vice president, told reporters that the business has grown “much faster than we ever expected.”
“We have always thought there was some potential. What really gave us the opportunity was the technological enhancement that allowed shale drilling on a more economical basis. It started first for us in the Bakken area, where there was suddenly a lot of oil that had no mode of transportation to get into the market place,” she said.
Robinson said CPR is developing multiple-origin train loading points in North Dakota and multiple-destination options for customers in Eastern Canada, the Northeast U.S., the Gulf Coast and the U.S. Midwest and is now eying a possible test shipment to the U.S. West Coast.
In 2008, Canadian National Railway was making bold predictions that it could move hundreds of thousands of barrels per day from the oil sands, using existing tracks, to the U.S. Gulf and West coasts.
But it is not willing to talk specifics beyond saying it is transporting light, heavy and oil sands crude from Western Canada to “various markets.”
Robinson said CPR is also eager to gain a slice of shipments out of the oil sands, confident that rail can play a role.
John Heida, a consultant at Purvin & Gertz, told the National Post that he expects rail will operate on a “case-by-case” basis rather than offering an industry-wide solution.
Robinson defended the safety record of railways, noting that if a rail car breaks open the most it can spill is 650 barrels, but added that the railways will supplement rather than replace pipelines.