Canadian Pacific tank car number 515038.

18 June 2011

Hungry Railways Want Slice of Bakken Pie

Loydminster Saskatchewan - Canadian Pacific Railway chief executive Fred Green had a message for investors about the oil under southern Saskatchewan:  This time it will be different and railways will get a piece of the pie.
 
North American railways have traditionally taken a back seat to pipelines when it comes to shipping crude oil, but Green and other rail executives say the prolific Bakken deposit is a chance to change that dynamic.
 
The Bakken field, which the U.S. Geological Survey estimates could hold as much as 4.3 billion barrels of oil, has emerged recently as one of North America's hottest energy plays.
 
New technologies are allowing producers to tap the reserves that lie mostly under Saskatchewan, North Dakota, and Montana in the United States.
 
Canadian Pacific and Canadian National railways have tracks in the region and see an opportunity to snag a piece of crude oil shipping for the long run before the pipeline infrastructure is built up.
 
CP's shipments of oil from North Dakota on its Soo Line main line from Canada to Chicago jumped in the past year to about 8,000 cars a year, up from 500, and it sees that growing to between 30,000 and 35,000 cars a year.
 
Green believes that growth can spread north as the Canadian portion of the Bakken field is developed.
 
"Our line runs right through the Saskatchewan Bakken, and we are already in dialogue with parties to see if we can replicate what we are doing in North Dakota in Saskatchewan," he told analysts recently.
 
Although more expensive than using pipelines, shipping by rail is more flexible, allowing producers to route shipments to refineries that are paying more for crude and avoid the brimming Cushing, Oklahoma, oil pricing hub.
 
That arbitrage advantage will allow the railways to maintain more of a market share than they traditionally would have once the pipeline infrastructure in the region is built up, Green said.
 
Allan Dowd.