CHICAGO As the volume of
crude oil shipments by rail continues to accelerate, more Class
I railroads are teaming up with producers, refineries, pipeline
and terminal operators, and others to move the product to
Montreal-based Canadian National
Railway Co. (CN) said that its crude-by-rail revenue jumped 300
percent in the first quarter of 2013.
"We expect a new crude loading
terminal to open on our line in the coming months," chief
marketing officer Jean-Jacques Ruest said during a recent
earnings call, adding that CN and pipeline companies "cooperate
where it makes sense."
"Refiners today (see) that
getting product by rail allows them to get a price they
cant get from a pipe," he said. "(As) refiners invest in
(tank car) fleets, pipeline companies are getting interested in
doing multimodal with the railroad and investing in
More energy market participants
are looking at receiving facilities and unit trains, Ruest
said. "This is just picking up momentum from one quarter to
another. The capital investment by all these different players
is very encouraging."
Rail isnt a stand-alone
solution, said CN president and chief executive officer Claude
Mongeau, who added that the railroad is talking with refineries
and producers about "rail and barges to get to a destination
refinery and using the ships unloading capacity. Or
its pipeline, then rail. We are seeing a range of new
avenues being created, which all clearly show that rail and
pipeline are complementary."
Canadian Pacific Railway Ltd.
(CP Railway) saw a 36-percent jump in revenue for crude oil
shipments in the first quarter, the company said during its
recent earnings call.
"This growth momentum continues
as loading network expands, our destination network diversifies
and shippers commit to the crude-by-rail model," said chief
marketing officer and executive vice president Jane A.
OHagan. "We have clear line of sight to two to three
times our current 70,000-carload run rate, and we believe that
a two-times target run rate can likely be reached 12 months
earlier than our original 2016 prediction."
Calgary, Alberta-based CP
Railway is investing $50 million in infrastructure to support
that line of business, chief executive officer E. Hunter
The majority of Canadian crude
goes to Gulf Coast refiners, "but other (regional) markets are
developing pretty quickly" so CP Railway has entered into talks
with producers and transloaders as well as marketers "to make
those markets" as demand from refineries builds up,
The company also sees its
relationship with pipelines as symbiotic, with plans to work to
move crude from pipelines.
Kansas City Southern is
negotiating with a potential partner to develop a unit train
unloading and storage terminal on property it owns in Port
Arthur, Texas, according to Patrick J. Ottensmeyer, the Kansas
City, Mo.-based companys executive vice president of
sales and marketing. Port Arthur refineries import about 1.7
million barrels of crude oil each day, he said. "Even if or
when (TransCanada Corp.s) Keystone (XL) pipeline is
completed, we believe it will be able to handle only about half
of this demand. We hope to announce the transaction very