According to the Canada Energy Regulator, the volume of Canadian crude oil shipped by rail fell to a four-year low of 58,048 bpd in May, compared to a peak of 412,000 bpd in February. Rail is one of the major lifelines for Canadian oil producers in landlocked Alberta due to limited pipeline capacity. However, producers cut output this year due to the coronavirus pandemic, leaving some space in Canada’s usually-congested pipelines.
Prospects of a longer-term rail recovery also fade as pipeline expansion projects are expected to start operations in each of the next two years. Cenovus CEO Alex Pourbaix said the company idled several thousand tank cars and spent $14.97 million every month for its suspended rail program that generated no revenue. The figure is equal to about 25% of the costs when it is fully active.
However, Pourbaix was optimistic that growing Canadian oil production would fill the expanded pipeline capacity and hence, revive the need for shipments through rail. Suncor Energy CEO Mark Little was even more upbeat saying some operators would increase rail shipments in 2020.
