Canadian oil producers seek alternatives as rail strike looms

Western Canadian heavy oil and bitumen producers are seeking alternatives to ship their barrels to markets with the stage being set for Canadian railroads to strike work starting Aug. 22, industry participants said.

"We are focused on the final outcome and continue talks with CN [Canadian National] Railway," Strathcona Resources CFO Connor Waterous, said last week on the company's second quarter earnings webcast.

"We have two-to-three weeks of storage in our fields and could cushion the blow. Then we have the option to transport our Lloydminster crude to pipelines and sell the blend," Waterous said.

Strathcona is shipping incremental heavy oil volumes from its Western Canadian asset base, following the start up of a new crude-by-rail offloading terminal on the US Gulf Coast, CEO Rob Morgan said on the same call.

"The terminal was purpose built to handle our Lloydminster thermal crude and in the second quarter saw a drawdown of oil from storage, equal to about 4,000 b/d," Morgan said then, adding in Q1 2024, the company had averaged crude shipments of 30,000 b/d after it teamed up with two long-term buyers on the USGC.

Strathcona has the ability to ship barrels from the Hamlin loading terminal in Saskatchewan without there being a need to blend the heavy crude grade with diluents and reducing the cost of transportation, according to information on Strathcona's website.

However, the Hamlin loading terminal will be impacted by the Canadian National railroad strike.

The CN strike will also impact the shipment of AltaGas' LPG barrels from the Wester Canadian Sedimentary Basin (WCSB) to the Ridley Island Propane Export Terminal at Prince Rupert in British Columbia.

"We're putting in contingency plans making sure our storage levels are adequate and we have a lot of empty rail cars along with it lots of loaded cars there at our export terminal," AltaGas Executive Vice President Randy Toone said on the company's Q2 earnings call early August. "We are preparing for it, and what we've seen is historically rail strikes don't last very long, and we think we have adequate measures in place to mitigate."

Teamsters serve notice

Meanwhile, the Teamsters Canada Rail Conference has served a 72-hour strike notice to Canadian Pacific Kansas City and CN, stating unless parties reach last-minute agreements, a work stoppage will occur, it said Aug. 20.

"We're serving strike notice to defend the rights and safety of our members," TCRC President Paul Boucher said in a statement.

This will be the second time in the summer that CN and CPKS are preparing to go on strike seeking better working conditions and higher compensation, with the last time being in late May.

Both CN and CPKC moved an average 94,413 b/d of crude in rail cars in the first five months of 2024 (January to May), according to the Canada Energy Regulator.

Total volumes moved from Western Canada -- the latest count -- was 89,141 b/d, it said.