Alberta government to invest $3.7 billion to move oil to market

Marco Green
February 22, 2019

"Albertans don't just stand by".

"The investment in crude by rail and the elevation of the amount of crude going by rail comes as a result of successive federal government failings" to get new pipelines approved and built, Notley said Tuesday.

Canadian crude-by-rail volumes hit record highs past year, but declined in 2019 after production cuts made rail shipments less economic.

The rail service will begin in July with about 20,000 barrels a day before ramping up to its full capacity of 120,000 barrels a day by mid-2020. The rest will be DOT-117R cars retrofitted to meet some DOT-117J standards, but a type that BNSF Railway Co is phasing out after a derailment in Iowa previous year. It initially thought it would need 7,000 cars, but was able to lower that number because it found better routes to market.

It is also noted that the increase in oil cars will not have an impact on agricultural shipments. "You can let the commercial deals work and let commerce take place and the deals will drive right good business decisions and investment decisions", Creel said, adding that the moves caused "uncertainty".

The APMC is projecting a US$4 per barrel narrowing of the price differential between WCS (Western Canadian Select) crude and the baseline WTI (West Texas Intermediate) price from early 2020 to late 2022.

Last fall, the price gap exceeded US$50 at times, prompting Alberta to impose mandatory production cuts as a short-term measure to staunch the bleeding.

Oil brokerage Net Energy Exchange indicates the heavy oil discount is now at US$14.50.

Elaborating on an announcement made at the end of last November, the provincial government issued a release on February 19 detailing the deal as well as the boons expected from the increase in oil cars.

The three-year plan will cost Alberta C$3.7 billion ($2.80 billion), consisting of buying oil, leasing cars and purchasing rail and loading services. The government has yet to drop the writ and call an election, but polls show the UCP with a lead on the ruling NDP.

Alberta Official Opposition UCP (United Conservative Party) leader Jason Kenney said he will review all government contracts signed after February 1 to prevent Notley's NDP (New Democratic Party) government from forging "sweetheart deals" in the lead-up to the upcoming Provincial election.

Other reports by Click Lancashire

Discuss This Article