Imperial Oil Ramping Up Crude by Rail, Not Pursuing Government Rail Leases
(Reuters) — Imperial Oil Ltd is increasing shipments of Canadian crude by rail after the recent Keystone pipeline outage created more favorable economics but is not looking to take on Alberta government contracts to move even more oil on trains, Chief Executive Rich Kruger said on Tuesday.
The shutdown last month of the leaking Keystone oil pipeline, which moves Alberta oil to U.S. refineries, increased the discount on Canadian heavy crude against U.S. light oil to reflect the steeper challenges moving it. That widening price gap made Canadian oil more attractive to the U.S. refiners who buy it, spurring additional movements on rail.
"We have been scurrying to increase rail shipments," Kruger told reporters on a conference call following Imperial's annual investor day in Toronto. He declined to estimate the volume of the increase.
"It's safe to say our fourth-quarter rail shipments will be higher than I thought they would have been a few short weeks ago."
Keystone resumed operation at partial pressure on Sunday, and the discount on Canadian crude shrunk on Tuesday to around $19 per barrel from as much as $23 last week, which was an 11-month high.
Congested pipelines forced the previous Alberta government this year to order production curtailments to support prices, and it also struck leases to move more crude by rail.
The new United Conservative Party government, elected in April, has maintained curtailments but plans to divest the rail leases, which amount to 120,000 barrels per day of capacity.
Exxon Mobil Corp-owned Imperial, which operates Alberta's biggest crude-loading terminal, is "not in the hunt" for new rail investments as the government curtailments create uncertainty, Kruger said.
Rival Canadian Natural Resources Ltd said last week that Alberta's rail leases were complex and it may take a while for private operators to take them over.
A spokeswoman for Alberta Energy Minister Sonya Savage said the contracts are indeed "highly complex."
"The government is looking to divest them as soon as possible, but at the best deal for Albertans," said spokeswoman Andrea Smotra.
Imperial would be interested in allowing other shippers who take on the government rail leases to access its terminal, Kruger said.
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