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Alberta has increased its bet on oil-by-rail transportation in the absence of new pipeline projects moving ahead, and will now lease 4,400 new rail cars to move more of its heavy crude south. The new rail transport capacity will add 120,000 bpd to the daily rate of shipments from Canada’s oil province.
“This is something that is fundamentally important to improving the return that all Albertans get on our important energy resources,” Alberta Premier Rachel Notley told media, as quoted by the Calgary Herald.
The lease will cost US$2.8 billion (C$3.7 billion) over three years but it is expected to result in a US$4.47-billion (C$5.9-billion) increase in oil royalties for the province as well as taxes, and commercial revenues over the same period.
There seems to be a unanimous agreement that increasing oil shipments by rail is not the ultimate solution, rather just a temporary one. However, the ultimate solution, at least according to oil industry proponents, is building pipelines, which doesn’t seem to be happening at the moment because of the strong opposition.
Among the other options Premier Notley’s government has considered was the construction of a new refinery in Alberta so more of the heavy crude produced in the province could be refined locally instead of exported, but this, too, has doubtful benefits.
Alberta has four refineries at present, with a combined refining capacity of 475,000 bpd. There are also two other specialized diesel-producing facilities that can refine 110,000 bpd of crude. A new refinery would indeed serve to stabilize prices of Canadian crude, but there is one problem: a refinery cannot be built in a month, or even in a year. What’s more, some experts argue that Canada’s oil province already has too much refining capacity and the only solution to its price problem are more pipelines.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.