In The Media

Canada oil recovery faces threat from potential rail strike

by Robert Tuttle & Frederic Tomesco (feat. Kevin Birn)

Bloomberg Quint
April 17, 2018

(Bloomberg) -- A potential strike by Canadian Pacific Railway Ltd. workers threatens to derail a recovery in Alberta’s beaten-down heavy oil prices.

On Tuesday, the Teamsters Canada Rail Conference and the International Brotherhood of Electrical Workers each gave Canadian Pacific a 72-hour strike notice informing the company of their plans to strike at 12:01 a.m. eastern time on April 21.

A strike would come at a critical time for Western Canadian oil producers. The heavy crude they pump is selling for $16.60 a barrel below the U.S. benchmark, from a discount of more than $30 in February. Oil flows out of Alberta to the U.S. have improved after pipeline and rail bottlenecks earlier in the year stymied exports.

“Any reduction in rail capacity would not be good,” Kevin Birn, a director at IHS Energy in Calgary, said by phone. “A rail strike would stretch or constrain CP, one of the major rail lines, at a time when its most needed.”

New heavy oil production from Suncor Energy Inc.’s Fort Hills mine, combined with reduced pressure on the TransCanada Corp.’s Keystone pipeline after a November spill filled remaining export lines to capacity this year, forcing producers to ship by rail as an alternative. But the rail companies were also constrained by heavy demand for grain shipments and cold winter weather that slowed trains.

Potential Logjam

While the maintenance shutdowns of oil-sands upgraders, including Syncrude Canada Ltd.’s plant near Fort McMurray, combined with rail lines moving “a little more” crude has helped alleviate the logjam, the discount could widen back out to between $17 and $19 a barrel once Syncrude resumes operation, Birn said. That assumes that a rail strike doesn’t happen.

CP is the second-biggest rail shipper in Canada after Canadian National Railway Inc. The carrier shipped 3,488 carloads of petroleum products the week ended April 14, up 28 percent from a year earlier, company data show.

“Serving a strike notice is part of the bargaining process that unions must follow if they want to be able to strike,” Canadian Pacific Chief Executive Officer Keith Creel said Wednesday in a statement. “We remain committed to achieving a win-win solution and urge the two unions to work closely with us and the federal mediators to achieve a positive outcome as soon as possible in the hours leading up to the deadline.”

Canadian Pacific made “significant movement” in bargaining Monday afternoon, presenting Teamsters Canada with new three- and five-year agreement options, according to the company. The railroad also said it plans to present three-year and five-year pacts to IBEW at a meeting later Wednesday.

The potential strike comes as the oil-producing provinces of Alberta and Saskatchewan introduce legislation allowing them to cut oil shipments to British Columbia in retaliation for B.C.’s efforts to derail the Trans Mountain pipeline expansion project. A move to turn off the taps to B.C. could further worsen the current glut by removing an export route.

"The oil industry is concerned about any further impact on the availability of rail capacity given the tight pipeline situation and is monitoring these new market developments as they unfold," Chelsie Klassen, spokeswoman for the Canadian Association of Petroleum Producers, said in an email.


Showing 1 reaction

Please check your e-mail for a link to activate your account.
SUBSCRIBE TO OUR NEWSLETTERS
 
SEARCH
PODCAST

An Update on the NAFTA Renegotiations

May 21, 2018


On today's Global Exchange Podcast, we touch base with CGAI's North American trade experts in light of a busy week on the NAFTA file in Washington. After months of hard-pressed negotiations, and 6 weeks of 'perpetual' discussions in Washington, the deal has reached its next turning point, with Congressional leadership signalling that they'd need a new deal by May 17th in order to have it passed before U.S. mid-term elections in the Fall. With no deal in sight, and the Congressional deadline now in the rear-view mirror, we sit down with Sarah Goldfeder, Laura Dawson, and Eric Miller to ask where we go from here.


IN THE MEDIA

No suitors emerge for pipeline project stake as Kinder Morgan deadline looms

by Dan Healing (feat. Dennis McConaghy), The Canadian Press, May 23, 2018

Iran Nuclear weapons deal: ticking time bomb

by Marc Montgomery (feat. Ferry de Kerckhove), Radio Canada International, May 23, 2018


LATEST TWEETS

HEAD OFFICE
Canadian Global Affairs Institute
Suite 1800, 421-7th Avenue SW
Calgary, Alberta, Canada T2P 4K9

 

OTTAWA OFFICE
Canadian Global Affairs Institute
8 York Street, 2nd Floor
Ottawa, Ontario, Canada K1N 5S6

 

Phone: (613) 288-2529
Email: contact@cgai.ca
Web: cgai.ca

 

Making sense of our complex world.
Déchiffrer la complexité de notre monde.

 

© 2002-2018 Canadian Global Affairs Institute
Charitable Registration No. 87982 7913 RR0001

 


Sign in with Facebook | Sign in with Twitter | Sign in with Email