According to the Motley Fool, the reason is “… right now, there is so much excess oil being pumped out of Canada’s oil sands that the pipelines simply don’t have the capacity to handle it all.”
The International Energy Agency recently reached the same conclusion in its Oil 2018 market report.
“Crude by rail exports are likely to enjoy a renaissance, growing from their current 150,000 bpd [barrels per day] to an implied 250,000 bpd on average in 2018 and to 390,000 bpd in 2019. At their peak in 2019, rail exports of crude oil could be as high as 590,000 bpd — though this calculation assumes producers do not resort to crude storage in peak months,” the International Energy Agency said, as reported by the 7.
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And Canada has plenty of capacity to load oil on more trains, which means if a producer is willing to pay the premium to move oil by rail, it can find a customer to do it. The infrastructure is in place to load approximately 1.2 million barrels per day.
With the cancellation of the Energy East pipeline project, which would have moved western Canada's tar sands east to Quebec and New Brunswick, the industry now is pursuing two remaining major pipeline projects: Kinder Morgan’s Trans Mountain and the Keystone XL. The Financial Post reported that the International Energy Agency predicts the earliest start date for either of those projects as 2021. Both pipelines are facing fierce opposition.
Additionally, the surge in U.S. crude oil exports has been affecting the value of Canadian oil, and some are predicting the flood of U.S. crude abroad could deliver a serious blow to the tar sands industry in the long-term.
Over the next several years, however, the Canadian tar sands industry appears poised to rely heavily on rail to export its product while awaiting construction of new pipelines, much like the situation that led to the Bakken oil-by-rail boom in the U.S.
Read more at Read more at Canada's Pipeline Challenges Will Force More Tar Sands Oil to Move by Rail
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