Opportunity knocks at the Port of Churchill

December 14, 2012

A number of factors are at play that suggest the Port of Churchill be considered for bitumen/heavy oil exports.

The port has four deep-sea berths capable of handling Panamax-size vessels for the loading and unloading of grain, bulk commodities, general cargo, and tanker vessels. The port is connected to the Hudson Bay Railway, an affiliated company of OmniTRAX. Further connections are made with the Canadian National Railway system. The port is iced in for much of the year and is accessible only between late July and early November, about a 4 month season.

The port is almost entirely reliant on grain from the Canadian Wheat Board (CWB) for its viability. Wheat accounts for 90 per cent of all traffic through the port. The CWB shipped 529,000 tonnes of western Canadian wheat through the port of Churchill during the 2009 shipping season.

These are factors that suggest the Port of Churchill would be a viable option for bitumen/heavy oil exports:

• Oil production is increasing, while pipeline capacity is maxed-out. In 2009, Alberta’s bitumen production averaged 1.5 million bbls per day and was continuing to grow, with 2019 production forecast at 3.2 million bbls per day. Meanwhile Canada’s oil export capacity is at its limit. No extra capacity is expected to come on stream until late 2013.
• There are two new pipelines that may help move bitumen to market. First, the Keystone XL pipeline (northern portion) has not been approved by the Obama administration. Second, Trans-Canada is considering a $2 B project to convert its mainline gas pipeline to oil. Even if both these projects go ahead, it would take years before the projects would go into service. 
• Churchill has a rail connection through the CN/Hudson’s Bay Rail system. The fastest growth area for CN has been carrying oil. Railways are flexible and adaptive. It takes years to build a pipeline—the railway can move commodity now.
• Proximity. It is 1,046 km.s from Ft.McMurray to Churchill, Manitoba. It is 200 km.s closer to tidewater than Prince Rupert, B.C.
• Producers of bitumen are losing $2.5 billion per month because they cannot ship the commodity to the market to get the best price. Alberta’s Energy Minister noted “Industry is missing out on somewhere between $15 and $20 billion in revenues per annum today because we’re landlocked and don’t have enough access to global prices.” (Calgary Herald)
• There is vociferous opposition to bitumen exports by tanker from Kitimat, as proposed by Enbridge’s Northern Gateway pipeline project. It is by no means clear that the NEB will allow a pipeline to the west coast to be built or that, even if permission is granted, the Northern Gateway would be built given the opposition. It is unclear that Northern Gateway will gain ‘societal license’.

In the medium term energy efficiencies and technological advances that have helped unlock vast oil supplies in U.S. shale rock formations are expected to make the U.S. a net exporter of oil by around 2030. Increased US production could well reduce demand for Canadian oil.

 

Commentary

Shipping bitumen/heavy oil by rail through Churchill must be an attractive option in the short run. Double hulled tankers and modern sat navigation mitigate the risks of catastrophic spills. If an oil pipeline to the west is a hard sell perhaps Churchill will rise to the challenge.

Sources

• a)http://en.wikipedia.org/wiki/Port_of_Churchill



• b)http://www.churchillcorporation.com/investors/the_opportunity/



• c)http://www.calgaryherald.com/business/Editorial+Canada+needs+pipelines+economic+well+being/7603202/story.html