Market Snapshot: Estimates of Canadian crude by rail movements show a peak in October 2015, roughly one quarter of total loading capacity

Release date: 2016-02-25

According to NEB dataFootnote 1, Canadian exports of crude oil by rail averaged 125 thousand barrels per day in the fourth quarter of 2015, up seven per cent from the third quarter. The highest level of crude by rail exports in 2015 occurred in October, hitting more than 166 thousand barrels per day before falling to just over 100 thousand barrels per day in November and December.

As shown in the chart below, statistics published by other organizationsFootnote 2 show a similar peak in the early autumn of 2015. Note that the Statistics Canada and Crude Oil Logistics Committee (COLC) data includes both exports and domestic deliveries. The difference between the NEB’s export data and these estimates for total deliveries averaged 53 thousand barrels per day in 2015. This represents domestic deliveriesFootnote 3.

Figure Sources and Description

Sources: NEB, EIA, Statistics Canada, Crude Oil Logistics Committee

Description: The above chart shows NEB crude by rail export data along with: the EIA’s estimates of crude by rail imports from Canada; estimates for total Canadian crude by rail movements (exports and domestic movements) based on data published by Statistics Canada and the COLC; and estimated domestic shipments implied by the difference between COLC total loadings and NEB exports. Between the beginning of 2012 and September 2014, total crude by rail loadings increased from around 10 thousand barrels per day to about 240 thousand barrels per day, while exports increased to about 180 thousand barrels per day. The volume of crude by rail movements decreased in the first half of 2015, hitting three year lows around May and June, before peaking again in the early autumn of 2015. Implied domestic shipments increased sharply in the second half of 2014, and averaged 53 thousand barrels per day between July 2014 and December 2015.

*Estimates using Statistics Canada and COLC data have been adjusted by NEB staff. See footnote 2 below.

According to the highest estimate in the chart above, the peak volume of crude loaded onto rail cars in Canada was 241 thousand barrels per day in September 2014. Looking forward, the NEB’s Energy Futures 2016 report includes a Constrained Oil Pipeline Capacity Case (Constrained Case) in which potential crude by rail volumes are substantially larger. The Constrained Case assumes that none of the major proposed export pipelines are built, resulting in a need for about 500 thousand barrels per day of crude by rail exports in 2017-2018, growing to 1.2 million barrels per day by 2040.

The current estimated capacity of crude oil rail loading facilities in western Canada is approximately 1 075 000 barrels per day, as shown in the chart below. This capacity is well above current and projected short-term needs.

Figure Sources and Description

Sources: NEB, Alberta Energy, company websites

Description: This chart provides an estimate of total crude oil rail loading capacity in western Canada, grouped by operator (note that some operators have multiple loading facilities). The total estimate is 1.08 million barrels per day of capacity. The top five operators (Torq, KinderMorgan/Imperial, Cenovus, Gibson and Altex) represent almost 790 thousand barrels per day of this capacity. There are 12 other operators that have a combined capacity of 290 thousand barrels per day.

Canadian National and Canadian Pacific have completed debottlenecking initiatives on congested stretches of track in recent years. These railroad companies have historically been able to, and likely will continue to, expand system capacity to meet the demand for freight transportation. However, rapid increases in demand could still be met with concerns such as those expressed in 2014, when the sharp increase in crude by rail movements coincided with a record prairie crop and lingering operational impacts from a very cold winter. This resulted in the federal government guaranteeing a minimum movement of 11 000 grain cars per week by way of an order which expired in March 2015.

A final capacity consideration is the rule to strengthen safe transportation of flammable liquids by rail, which was announced jointly by the Canadian and U.S. governments in May 2015. The rule set out a schedule for retrofitting existing rail cars. The deadlines for retrofitting jacketed tank cars (those used most often to ship heavy crude oil from the oil sands) are May 2023 or May 2025, depending on the car model. Given current low railcar lease rates, and several years notice for retrofitting, railcar availability does not appear to be a constraint on crude by rail exports.

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