Producer cites benefits of rail transport of bitumen

By OGJ editors

Southern Pacific Resources Corp., Calgary, has completed a long-term agreement to ship bitumen by rail to the US Gulf Coast in a system it says will improve production netbacks at its STP-McKay thermal oil sands project west of Fort McMurray, Alta.

The producer says the arrangement, with the Canadian railroad CN, will increase the value of bitumen at the production site by lowering shipping costs relative to pipeline transport.

Rail shipment requires about 33% less process diluent than what is necessary to meet pipeline specifications, Southern Pacific said. And return-trip rail cars can supply the project with low-cost Gulf Coast diluent.

The arrangement also provides pricing advantages, according to a press statement.

“The Gulf Coast market for heavy crude currently trades at a premium to WTI [West Texas Intermediate], whereas Alberta-based blended bitumen and diluent products arriving by pipeline into the Cushing, Okla., region of the US are experiencing significant pricing discounts due to capacity constraints,” the statement said.

The system

Under the arrangement with CN, bitumen will be trucked 38 miles from the STP-McKay site, 28 miles northwest of Fort McMurray, to a rail terminal at Lynton. From there, rail cars will carry the material 2,800 miles over CN’s network to Natchez, Miss., for transfer into barges that will carry it down the Mississippi River to Gulf Coast refineries.

Southern Pacific expects shipments to begin in the fourth quarter this year, eventually reaching 12,000 carloads/year.

The STP-McKay project, still under development, will use steam-assisted gravity drainage to produce 12,000 b/d in an initial stage, which Southern Pacific has indicated will be expanded to 18,000 b/d (OGJ Online, May 11, 2012). A second phase will push output to 24,000 b/d.

The Southern Pacific-CN arrangements have an average term of 5 years with options for extension. The companies are discussing elimination of the trucking link with construction of a pipeline or rail link between the project site and Lynton terminal.

Either option would reduce diluent needs, Southern Pacific said. The arrangement gives the producer flexibility to deliver bitumen elsewhere in North America, including export terminals on the West Coast.

A CN executive said the railroad expects to move about 25,000 carloads of crude oil this year, five times the number of last year.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

Quicksilver Canada gets LNG export approval

07/02/2015 Quicksilver Resources Canada Inc. has received approval from the National Energy Board of Canada to export 20 million tonnes/year of LNG from a pos...

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

Shell makes FID on Appomattox deepwater development in Gulf of Mexico

07/01/2015 Royal Dutch Shell PLC has taken a final investment decision (FID) on the Appomattox deepwater development, authorizing construction and installatio...

Woodside-led Browse FLNG venture enters FEED phase

07/01/2015 The Woodside Petroleum Ltd.-led Browse LNG joint venture has entered the front-end engineering and design phase for a floating LNG (FLNG) developme...

Case for Keystone XL has grown stronger, TransCanada tells Kerry

06/30/2015 Canada is taking strong steps toward combating climate change, and the proposed Keystone XL pipeline crude oil pipeline remains in the US national ...

Construction begins on Chinese section of Russia-China Gas Pipeline


Construction has begun on the Chinese section of the Russia-China Gas Pipeline, according to China National Petroleum Corp.

White Papers

Definitive Guide to Cybersecurity for the Oil & Gas Industry

In the Oil and Gas industry, there is no single adversary and no single threat to the information tech...

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected