United States rail car manufacturers should have enough units on the rails to carry 2 million barrels per day by the end of 2014, well over double what is currently extracted from the Bakken shale basin, according to an a rail industry advisor.
Of the current tank car backlog of about 48,000 as many as 30,000 are needed for crude petroleum, Toby Kolstad, who runs the firm Rail Theory Forecasts told the National Post, and the firm is counting on thousands of cars coming off the production lines at Trinity Industries, Union Tank Car and Greenbrier.
Industry observers believe that up to 40 percent of the orders will come from Canadian oil producers anxious to get their volumes from the Alberta oil sands and Saskatchewan Bakken to U.S. refineries in the east and Gulf Coast.
Others share Kolstad’s predictions, with Doug Reece, business development manager for Procor, an Ontario-based affiliate of Union Tank Car, estimating the backlog at 45,000 cars, including a “considerable number” for crude oil service.
Rail moving 4 percentCurrently, about 4 percent of total Canadian crude output is believed to be moving by rail and more than C$1 billion has been earmarked for investment in rail infrastructure.
Jean-Jacques Ruest, chief marketing officer with Canadian National Railway, said in a recent TV interview that the shortage of rail cars will probably extend through 2014 and “after that we’ll see.”
A spokesman for rival Canadian Pacific Railway said the energy and rail industries want to ensure rail car capacity is “built up quite rapidly. It is something that is being worked on and monitored very closely by both industries.”
The prospects are sufficiently encouraging that big-time investors like Carl Icahn and Warren Buffett are building their rail interests.
Icahn has disclosed a 9.9 percent stake in Greenbrier and is eager to merge that Oregon-based company with American Railcar Industries, in which he holds 56 percent.
Buffett has a controlling share of Union Tank Car and is a major player in BNSF Railway, which reported earnings of $272 million from crude shipments last year.
A spokesman for Greenbrier said the demand for tank cars was seven times greater last year than in 2011, but doubts there will be a shortage given the options that are available to handle the pressures.
However, Greenbrier has introduced a new tank-car line at its Mexican plant, doubling capacity and taking orders for 2015 from crude producers and refiners.
Kolstad was reluctant to forecast a peak for crude tanker demands, noting that rail movement out of shale deposits, such as the Bakken, could be made redundant if TransCanada’s Keystone XL pipeline goes ahead.