Canada mulls northern route

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Gary Park

For Petroleum News Bakken

The Bakken formation could fuel short-term plans to ship crude from the Port of Churchill on Canada’s Hudson Bay, said the Canadian president of Denver-based OmniTrax, one of North America’s largest private railroad and transportation management companies.

Brad Chase told a recent Insight Canadian Oil Sands summit that the seaport, used for decades to export grain during summer months, is part of his company’s long-term goal of shipping crude, starting with light, sweet crude, primarily from the Bakken.

“We see five to eight years, as our prediction, of opportunity,” he said. “We’d like to be there starting in 2013.”

Chase said Churchill could also be a shipping point for diluents over the next few years, followed by Alberta’s heavier crude products.

He said heavy crudes “really are the long-term plan” allowing shippers to get to tidewater at Churchill “fast and open markets.”

Chase said ships move freely through Hudson Bay from mid-July to late October, although the port can handle ships outside that window if users are prepared to pay higher insurance rates.

He said permits and licenses are in place for the port to handle oil, but a third-party engineering firm is consulting with stakeholders to ensure best practices.

Although Churchill would benefit both Alberta and Saskatchewan, the proposed use of rail to ship crude more than 1,200 miles to connect at Delta Junction, Alaska, with the trans-Alaska oil pipeline, shapes up as a more viable option, said Richard Dixon, executive director of the University of Alberta School of Business Center for Applied Research in Energy and the Environment.

He said a route through Alaska connects to existing pipeline infrastructure and facilities, creating an economic advantage.

Dixon said the biggest problem with using Churchill for tidewater access is the restricted shipping season.

He said uncertain weather conditions give no assurance to marketplaces and “that’s really the key driver here,” noting that crude could be faced with long periods of storage and inaccessibility due to ice.

“Oil markets don’t work that way,” he said. “With crude oil, it’s more the issue that you’re trading so much of it every day.”

Alberta Energy Minister Ken Hughes has indicated he is open to exploring all options, including a route down the Mackenzie River Valley to the Beaufort Sea, although he said some of the proposals are more long-term or speculative than others.

Dixon said OmniTrax is ready to meet with any provincial or territorial governments who want to examine ways to get crude to new markets.

Hughes said Alberta sees the potential of a regional energy corridor that would allow Manitoba to sell some of its hydroelectricity to Alberta in return for allowing private-sector players to develop the Port of Churchill for the export of petroleum products.