Diversifying markets for Canadian oil production is vital to ensure Canada receives full value for its natural resources.
This transportation network involves all modes of transportation that includes pipelines, rail, marine and trucks. In 2015, 3.9 million barrels of Canadian crude were safely transported by pipelines, marine tankers and rail every day. Of that, 2.4 million barrels (equivalent to about 135 Olympic-sized swimming pools) were from the oil sands.
Crude oil has been safely transported by pipelines for more than 30 years. Pipelines are the most efficient method of transporting large quantities of crude oil.
Canada’s oil industry needs support for more infrastructure development in order reach more customers – within Canada, across North America, and around the world. Limited infrastructure results in tight capacity and delays the movement of oil to market, which impacts economic strength – an important factor in quality of life.
Canadian crude oil producers continue to build new markets for their expanding production. New market opportunities include Eastern Canada, the U.S. and growing economies in Asia. Diversifying markets for Canadian oil production is vital to ensure Canada receives full value for its natural resources.
Eastern Canada currently imports oil from foreign suppliers. Currently, over half of the oil used in Quebec and Atlantic Canada is imported from foreign sources and in 2015, Canada spent almost $17 billion to import foreign oil from Saudi Arabia, Venezuela, Nigeria, Angola and the United States.
The west coast is a critical outlet for Canadian oil and natural gas to reach new customers. Asian markets are an eight- to 11-day sail from proposed West coast terminals – which is two days faster than most international competitors.
Canada’s existing pipeline infrastructure is limited when it comes to moving oil. Over the next few years, crude oil supply is expected to exceed existing pipeline capacity, requiring expansions and new pipelines to access new and existing markets.
Oil tankers have been moving safely and regularly along Canada’s West Coast since the 1930s. Each year, approximately 580 million barrels of oil are safely transported along Canada’s East and West coasts via tanker. Access to tidewater gives Canadian crude oil access to U.S. and overseas markets.
All ships transporting crude are regularly inspected against strict international standards.
Although safety regulations make the probability of a spill extremely low, detailed response protocols are in place. Canadian legislation is based on the “polluter pays” principle. Although probability of a spill is extremely low, a total of $1.36 billion per incident is in place to cover cleanup costs, including:
- Insurance is compulsory for all ship owners. Maximum liability for each vessel carrying crude oil is $145 million.
- If costs exceed $145 million, additional funding up to $1.2 billion is available under the International Oil Pollution Compensation Funds as Canada is a member. These funds are supported by levies paid by shipping companies.
- Canada’s domestic fund – the Ship Source Oil Pollution Fund – is also supported by levies paid by shipping companies. The fund’s current reserve is –$400 million, with $161 million available per incident.
In the unlikely event there is an incident, the Western Canada Marine Response Corporation (WCMRC) is certified by Transport Canada to respond to crude oil spills up to 10,000 tonnes (65,000 barrels with in a prescribed time). WCMRC has a fleet of 30 response vessels, booming capacity of 32,000 metres (two and a half times government requirements), 11 equipment caches located strategically along the B.C. coastline, and warehouses in Burnaby, Duncan and Prince Rupert.
Rail remains an important piece of the transportation network, allowing producers the flexibility to move to different markets in response to demand opportunities. It also complements pipeline capacity and provides an alternative for markets without pipeline connections.
In recent years, rail transport of crude oil has grown as an alternative mode of transportation to accommodate the rapid growth from new supply regions that quickly exceeded available pipeline capacity. In the first six months of 2015, about 125,000 barrels per day of crude oil were moved by rail. Rail loading capacity in Western Canada is currently about 776,000 barrels per day.
In 2015, measures were taken by U.S. and Canadian governments to enhance and align standards for rail safety. Ongoing safe transport of hydrocarbons is in the interest of oil and natural gas producers and all Canadians – so the industry can continue to deliver jobs and economic benefits. Every day a variety of goods are moved by rail – grain, consumer goods, oil, chemicals and other materials. We are just part of that mix. Approximately 3.8 million barrels per day of crude oil are produced and transported in Canada, of which about 160,000 is exported by rail. While these numbers may fluctuate, both rail and pipeline are important modes of transportation.