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Canadian oil producers see new path to Gulf Coast refineries coming from CP Rail deal

Canadian oil producers see new route to Gulf Coast refineries coming from CP Rail deal


Rail route ‘seems to be promising’ after cancellation of Keystone pipeline

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CALGARY — Canadian Pacific Railway Ltd.’s blockbuster US$25-billion deal for Kansas Metropolis Southern provides new hope for expanded entry to the Gulf Coast for Canadian oil producers which have struggled to achieve heavy oil markets in Texas and Louisiana.

Canadian oil and gasoline corporations have for years tried to develop their choices to ship heavy oil from Alberta to the southern coast of the USA, however their efforts to achieve the world’s largest focus of heavy oil refineries have been challenged time and time once more. Most not too long ago, U.S. President Joe Biden cancelled permits for the Keystone XL pipeline.

CP Rail’s take care of KCS “seems to be promising, however we’ll must see what they really do,” stated Tristan Goodman, president of the Explorers and Producers Affiliation of Canada, which represents mid-sized oil and gasoline corporations.

“They’re not terminating in an excellent space for us, fairly frankly,” he stated of CP Rail’s present community, “so becoming a member of forces does have a profit.”

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At the moment, solely Canadian Nationwide Railway Co. provides a direct route for oil producers to ship crude from Alberta to the U.S. Gulf Coast, however the mixed CP/KCS railway community may introduce some competitors among the many railways to maneuver these barrels.

The CP and KCS rail networks presently join in Kansas Metropolis, from which level the KCS rail line provides direct connection to heavy oil markets in Louisiana (Shreveport, Baton Rouge and New Orleans) and Texas (Beaumont, Port Arthur, Houston and Corpus Christi).

“Together, the mixed railroad can provide one-railroad connectivity between Alberta and U.S. Gulf Coast markets through these present KCS connections,” stated Paul Bingham, director within the transportation consulting enterprise at IHS Markit.

The deal may additionally scale back total transport prices by boosting competitors between CP and CN, stated Darryl Anderson, managing director for maritime and multimodal transport at Wave Level Consulting Ltd. in Victoria,

The businesses’ respective networks wouldn’t be an identical, however “on the finish of the day, market entry is commonly about worth,” he stated, including the extra rail connections would permit home power corporations “to promote merchandise to a distinct and bigger buyer base.”

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At the moment, crude by rail accounts for about 5 per cent of income at CP and about two per cent at KCS. The 2 corporations imagine the deal will enhance these revenues.

CP spokesperson Jeremy Berry in an emailed assertion stated the corporate plans to make use of a crude-by-rail facility in Alberta that pulls the mixing brokers out of heavy crude oil to create a “pipeline-competitive approach of delivering Alberta power merchandise to market by rail.”

He added: “We are able to do that as the mix will present for a extra direct and environment friendly path to refineries on the Gulf Coast.”

A mixture of power merchandise, together with crude oil and fracking sand, chemical compounds and plastics, make up roughly 20 per cent of CP Rail’s whole freight income, Morningstar analyst Matthew Younger stated in a analysis word.

“We imagine CP and KCS’ networks are largely contiguous and these rails usually don’t compete face to face in particular markets, thus a merger shouldn’t end in fewer rail-service choices for shippers in most corridors,” he famous, including that he anticipated the deal could be accredited by regulators.

Alberta Premier Jason Kenney referred to as the proposed transaction “excellent news for Alberta’s economic system,” as a result of it permits CP Rail, one of many province’s largest private-sector employers, to develop.

“The mixed rail community will give CP direct entry to the U.S. Gulf Coast and past, permitting it seamlessly to move Alberta power on to Gulf Coast refineries, enhancing the economics of crude by rail,” he stated.

• E mail: gmorgan@nationalpost.com | Twitter:

In-depth reporting on the innovation economic system from The Logic, delivered to you in partnership with the Monetary Submit.

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