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Report: Pipeline shortage could boost crude-by-rail activity


Western Canada's crude-oil pipeline system is not keeping up with production, which could create a resurgence of crude-by-rail activity, according to a new report highlighting the need for new pipeline capacity.

Western Canada may see a supply increase of nearly 1 million barrels of crude by 2020, which is putting pressure on an already constrained pipeline system that has struggled with bringing online new capacity, according to a press release about the report issued by IHS Markit.

The report, "Pipelines, Prices and Promises: The Story of Western Canadian Market Access," examines the relationship between pipelines and prices, the implication of delay in new pipeline capacity that has occurred in western Canada and the industry's current outlook.

"The need for new pipelines departing Western Canada has not diminished with lower oil prices, quite the opposite," said Kevin Birn, energy director for IHS Markit, who leads the Oil Sands Dialogue. "Canada remains a growth story with production volumes increasing since the oil price collapse. And with continued growth it appears inevitable that volumes will overtake an already-constrained system and create a resurgence of crude-by-rail."

As none of the currently proposed pipeline capacity would come online prior to 2019, a resurgence of crude-by-rail shipments out of Western Canada is likely to occur through the end of the decade, the report concludes.

Contact Progressive Railroading editorial staff.

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