Crude by rail to peak?

A new report from IHS has said that the amount of crude oil transported by rail in North America could peak between 2015 and 2016 at approximately 1.5 million bpd, though rail is expected to remain a key component of North American oil production over the long term. The new report titled ‘Crude by Rail: The New Logistics of Tight Oil and Oilsands Growth’, is part of the IHS Oilsands Dialogue and examines the rapid rise and future outlook for rail transport of crude oil in North America, which has increased from approximately 20 000 bpd in 2009 to over 950 000 bpd in 2013. This year, the transport of crude oil by rail is expected to average approximately 1.1 million bpd.

Report details

The report includes a review of the role of crude by rail, the safety of crude and hazardous material transport in general and the potential implications on the transport of crude oil by rail of evolving policies being proposed by regulators in Canada and the US. The report says that even with the advent of new pipeline capacity such as Keystone XL, over 900 000 bpd can be expected to be transported by rail in North America through the end of this decade. The report also explores questions related to the safety of increased volumes of rail transported crude in recent years and the implications of new safety related rules proposed by governments in Canada and the US.

The report has also found that train accidents have fallen more than 40% during the past decade and despite an increase in the transport of what are designated as hazardous materials by rail, accidents involving these types of materials have also trended down. However, with very little oil having been transported this way prior 2009 there has been an increase in accidents involving crude oil along with the growth of those shipments. New policy proposals in Canada and the US, such as lower speeds and heavier cars, are aimed at enhancing safety of crude by rail but may also lead to more carloads or traffic for the same volume of crude.

Comments

Kevin Birn, Director, IHS Energy said, “rail transport of crude oil has become an enabler of growth in North America, playing a crucial role as pipeline capacity has struggled to keep pace with the rapid rise of North American oil production since 2008. Despite the recent price volatility crude by rail is here to stay and will continue to play an important role going forward.

“There is and will be a role for rail connecting pipeline deprived producers to refiners or pipeline deficient refiners to inland production. For instance there are refiners on the coast, particularly in the East, designed to import crude oil from offshore. Railroads provide coastal refiners originally designed to run offshore crude oil, access to a growing inland North American supply of similar quality at a lower price.”

Birn concluded, “there is some uncertainty as to whether some of these proposals could carry unintended consequences such as whether more traffic could result or whether enough rail cars would be available under certain policies being contemplated. In turn, all of this will affect the cost and ability of railroads to deliver crude and ethanol to market.”

Edited from press release by Claira Lloyd

Read the article online at: https://www.worldpipelines.com/business-news/12122014/peak-of-crude-by-rail/