Canada’s railways, particularly CN, have begun shipping increased quantities of bitumen, ‘dilbit’ and oil to refiners as pipeline capacity is reached.
Although pipelines continue to carry the overwhelming majority of Canada’s oil production, both Canadian National Railway Co. and Canadian Pacific Railway Ltd. have begun using their rail networks to deliver crude.
CN now sends oil sands bitumen to California; heavy oil from Cold Lake, Alta., to Chicago and Detroit; and crude from the Bakken, a fast-growing play in southern Saskatchewan, to the U.S. Gulf Coast. Though rail does not have the same reach into production fields as pipe - indeed, rail cars are typically loaded and unloaded by truck, which is costly - CN boasts that its tracks lie within 80 kilometres of five million barrels a day of refining capacity, which is more than double Canada’s entire U.S. exports. CN claims that pipelines charge $17.95 per barrel to ship oil from Alberta to the Gulf Coast and CN can do it cheaper.
A unit train typically consists of 80 to 150 cars; each car can hold 550 barrels. Rail cars can also ship pure bitumen, the very heavy crude produced in the oil sands. Bitumen is so thick that it needs to be mixed at about a 70-to-30 ratio with a thinner hydrocarbon - called ‘dilbit’ - to flow in a pipeline. Diluted bitumen then needs to be returned to the oil sands, creating substantial additional pipe costs. Rail cars, which are already used to transport asphalt, can take undiluted bitumen, dilbit or oil.
Rail does not have good systems for handling large volumes of oil, although both companies are spending to develop that. CN is preparing to deploy “rapid deployment units” that cut in half the 45 minutes it currently takes to load a single tanker with crude. But the “scalability” of the concept—up to four million barrels per day—means that the railway can ramp up production vastly by just adding rail cars.
It also allows producers additional options for getting oil to market. Some 2 million barrels of Canadian crude go through pipelines to the U.S. daily, and estimates are that only 10,000 to 20,000 go by rail. Some estimates say it costs $3 to $6 to move a barrel of crude through a pipeline versus $15 to move it by rail. The rail option, that did not exist even 2 years ago, will continue grow.