TransCanada Corp’s decision this week to scrap its $12 billion Energy East pipeline and delays to other export pipeline projects look set to increase producers’ reliance on costly crude-by-rail to bring barrels to market. […]
This article comes on the heels of a recent spate of negative natural gas pricing out of the AECO hub in Alberta, Canada. Logistical bottlenecks have backed up gas in the provincial markets. This extraordinary market development strongly incents producers to shutter excess production, but also strongly favors midstream economics since hubs can charge next to nothing and still make a decent margin. The authors’ assessment that this predicament also favors crude-by-rail is interesting since it is clearly preceded by an earlier crude-by-rail boom in the Dakotas. While that boom has since collapsed due to lower production in the Bakken and increasing take-away capacity, the boom did provide a substantial bumper to rail companies’ earnings beginning in 2008. It is not a stretch to imagine how a similar boom might again manifest itself in the deeper north.
Article Source: Nia Williams and Ethan Lou. Canada expects crude-by-rail boom as pipeline project collapses. Reuters. 06 Oct 2017. Original content accessible: http://www.nasdaq.com/article/canada-expects-crudebyrail-boom-as-pipeline-project-collapses-20171006-00711
Updates to the Read List are meant to keep readers informed of stories and analytical highlights from third party sources that I find particularly relevant and worth sharing. Content that was recommended prior to 2017 is accessible through the Read List Archives.