Another blow for Canadian Oil

As if the Canadian oil and gas industry didn’t have enough problems with transporting product… now they have a threatened rail strike looming. It would seem they are caught between a rock and a hard place following the govt’s announcement that beginning in December they were allowing companies to produce more oil despite the industry-wide production cuts, on the proviso that those firms move the additional product via rail.
This strike isn’t expected to last long, but it highlights yet again the need for Canadian pipeline construction.

Strike In Canada Threatens Crude By Rail Shipments

By Tsvetana Paraskova – Nov 19, 2019

More than 3,000 railway conductors, train persons, and yard workers at Canadian National Railway (CN) went on strike at midnight on Tuesday, threatening to disrupt crude by rail shipments out of Alberta.

The Teamsters Canada Rail Conference (TCRC) union served CN on Saturday notice of intent to strike, demanding longer rests and medicine benefits for the safety of the workers and the railway services.

“Unfortunately, we were unable to reach a deal with CN. The company remains unwilling to address our members’ heath & safety issues,” the union said on Tuesday as the strike began.

CN transports more than US$190 billion (C$250 billion) worth of goods annually across Canada and the United States, including crude oil. In recent years, crude by rail shipments have grown due to the lack of new pipelines to ship the Canadian oil out of Alberta to its main export market, the United States.  

Analysts don’t expect the strike to last long, as the government is likely to intervene because of the potential significant impact on economy in case of a prolonged labor action, Credit Suisse’s analyst Allison Landry said in a note, as carried by Bloomberg.

The strike at the railway operator comes at a challenging time for the Canadian oil industry, which has suffered from lack of sufficient pipeline capacity to carry oil to refining centers.

Last month, the government of oil-rich Alberta allowed energy firms to produce more oil despite the industry-wide production cuts, if those firms move the additional barrels by rail, as continued pipeline capacity shortages dampen the prospects of Alberta’s oil and gas sector. The special allowances for oil companies are set to come into effect as of December and the volumes will be based off an operator’s average rail shipments for Q1 2019.

Canadian energy companies continue to believe that the long-term solution to Canada’s oil industry’s woes is the construction of major new pipelines to increase market access, and potentially, to tap new export markets outside the buyer of nearly all Canadian oil exports, the United States.

By Tsvetana Paraskova for Oilprice.com

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