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Canadian National Railway Co. expects to set a record for crude-by-rail shipments next year as it vies with Canadian Pacific Railway Ltd. to dominate a booming market for the alternative to pipelines.
Crude oil shipments next year will probably surpass the 130,000-carload mark set in 2014, Chief Executive Officer Jean-Jacques Ruest said Wednesday after the company reported third-quarter earnings. That would allow the carrier to vault ahead of CP Rail, whose CEO said last week he’s aiming to reach as many as 120,000 carloads.
“2019 has the makings of being a record year for crude by rail,” Ruest said in a telephone interview from Montreal. “From a volume point of view, based on the visibility we have from the people who are shipping and buying crude, it looks to us like we will be the biggest Canadian carrier next year.”
The record mark would amount to about 250,000 barrels a day, more than the production capacity of OPEC member Gabon, based on an average tank-car volume of 700 barrels.
Canadian National, the country’s biggest railroad, is about 80 percent through a capacity expansion that’s part of a record C$3.5 billion ($2.7 billion) capital spending program for 2018 aimed at fixing bottlenecks and service issues. The company is focusing most of the investments, such as double tracks, on its main line between Edmonton, Alberta, and Winnipeg, Manitoba.
“This is the heart of our network,” Ruest said. “We’re adding resilience. A lot of the business goes through that line,” he said, citing key commodities such as grain, oil and potash.
A shortage of pipeline space to ship Canadian oil to U.S. refineries has led prices to plunge to about $20 a barrel, with the discount to the U.S. benchmark reaching $50 a barrel earlier this month, the most on record in Bloomberg data stretching back to 2008.
Crude shipments in the fourth quarter are poised to exceed those of the third quarter, Ruest said in the interview, declining to provide specific figures.
“In the summertime we did not have enough capacity to meet the demand,” Ruest said. “This is one of the reasons why we didn’t move as much crude as some people thought. Our capacity is coming back, and with the contracts we have signed, we think at some point we will be a bigger railroad” than Canadian Pacific, he said.
This article first appeared on www.bloomberg.com
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