Recently the Sherwood Park & District Chamber of Commerce attended a webinar titled “The Role of Rail in Canada’s Crude and Petrochemical Markets” hosted by Dinara Millington, Vice President Research with the Canadian Energy Research Institute (CERI). Canada is faced with both challenges and opportunities around rail transport of crude oil and petrochemicals. This presentation detailed findings from CERI’s research that included examining rail-based supply chain logistics, rail-demand by commodity, and challenges and opportunities within the supply chain.
Overview
Canadians are reliant on a strong transportation system. According to the Canadian Transportation Economic Account (CTEA) rail transportation added $88 billion to Canada’s GDP, and the value of goods and freight volume that is moved by Canadian rail has grown from $75 billion in 2009 to $144 billion in 2018.
The prairies region (AB, SK, MB) accounts for 55% of commodity outflow to the US and Mexico in 2018.
In 2018, the prairies region, consisting of Alberta, Saskatchewan, and Manitoba, accounted for 55% of Canada’s regional Commodity Outflow to the US and Mexico. The top 5 commodities being moved out of the prairies region in 2018 are agricultural, plastic and chemical products, fuel oil and crude petroleum, minerals, food products.
Canada has seen recent pipeline constraints that have caused increased rail use. Export pipelines reached capacity in late 2018, and as a result, the volume of crude that travelled by rail doubled from 2017 to 2018.
Future Projections
CERI predicts that the top 5 commodities that would travel by rail in 2025 would be agricultural products, petrochemicals and chemical products, coal, mineral groupings, and forest products. This prediction includes the assumption that increased pipeline capacity through TMX, Line 3, and KXL, will be operational by this time.
CERI also predicted crude oil export volume by rail, based on various pipeline capacity scenarios, showing a sustained year-over-year increase in rail demand should pipeline expansion continue to be delayed.
Differing scenarios based on different outcomes of pipeline capacity expansion.
Case Study: Alberta’s Industrial Heartland
Alberta’s Industrial Heartland presents an interesting case study around the value of further rail investment. CERI model suggests that nearly $340 million in rail investments are needed to accommodate new Heartland facilities becoming operational between 2020 and 2025. It is projected that the resulting GDP value would be nearly $6.7 billion over a six-year period – a more than ten-fold increase over the original investment.
The rail investments needed to accommodate growth in AIH, while showing the resulting GDP impacts over a six-year period.
CERI is a research-based charitable organization founded in 1975. CERI’s mission “is to provide relevant, independent, and objective economic research of energy and environmental issues to benefit business, government, academia, and the public”, and their analysis covers “energy economics, and related environmental policy issues in the energy production, transportation, and consumption sectors.”
For the full video presentation, click here.