Canada's Crude-by-Rail Terminals Sit Idle as Oil Glut Grows

March 26, 2018

Stranded Canadian crude is waiting for trains to take it to U.S. refineries.

A rail terminal near Edmonton that oil-sands producer Cenovus Energy Inc. bought for C$75 million ($58.2 million) sits underutilized just when it's most needed. The Bruderheim crude-by-rail facility is operating below its potential because of a shortage of locomotives, the company said last week.

Cenovus' situation isn't unique. After spending hundreds of millions of dollars building rail terminals able to handle more than a million barrels a day of oil, Canadian crude producers are discovering that all the loading capacity in the world isn't sufficient if rail companies don't provide enough locomotives, conductors and track space to transport the oil.

"Everyone kind of fell into the train of thought, that when they needed the rail resources from the rail companies that they would be there," Mike Walls, Genscape Inc. analyst, said in phone interview. "It's been frustrating for crude-by-rail shippers."

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