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Dinara Millington, Vice President, ResearchCalgaryMarch 10, 2020
www.ceri.ca
WEBINAR:THE ROLE OF RAIL IN CANADA’S CRUDE AND PETROCHEMICAL MARKETS
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Allan Fogwill
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OVERVIEWFounded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable organization specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors.
Our mission is to provide relevant, independent, and objective economic research of energy and environmental issues to benefit business, government, academia and the public.
CERI publications include:
Market specific studies
Geopolitical analyses
Quarterly commodity reports (crude oil, electricity and natural gas)
In addition, CERI hosts a series of study overview events and an annual Petrochemicals Conference.
CORE FUNDERS
FUNDING SUPPORT
IVEY FOUNDATION
IN-KIND SUPPORTAlberta Energy Regulator | Bow Valley College | CEPA Foundation
JWN Energy | Northern Alberta Institute of Technology Petroleum Services Association of Canada
S.M. BLAIR FAMILY FOUNDATION
AGENDA
Introduction
Study Scope
Background of Supply Chain Logistics
Survey/Interview Results
Methodology and Assumptions
Results and Forecast
Conclusions
Q&A Period
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WHY THIS STUDY?
• Concerns have been expressed by stakeholders in the rail-basedsupply chain regarding logistical challenges of using rail to getproducts to market because those challenges are constrainingtheir growth.
• Increased reliance on rail networks for crude oil, natural gasliquids (NGLs), petrochemical and other products suggests thatthese challenges may have an impact on the economic growthpotential for Canada.
• Analysis of the economic costs of rail capacity additions and therisks of new capacity versus the status quo, and how Canadiansupply chain logistics could be impacted.
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Research Objectives
• Conduct a review of rail-based supply chain logistics
• Provide a detailed outlook for rail demand by commodity, region and direction
• Assess future investment requirements to grow capacity
• Identify challenges and opportunities within the supply chain
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Canadian Transportation Sector
80
20
40
60
80
100
120
140
160
2008 2010 2012 2014 2016 2018 2020mill
ions
of d
olla
rs (1
0^3)
According to the Canadian Transportation Economic Account (CTEA):
Total transportation sector’s GDP contribution - $153.4 bln or 8% oftotal Canadian GDP
Rail transportation’s contribution to Canadian GDP is $88 billion in2018 or 4.5% of GDP
The freight volume and value of goods moved by the Canadian railnetwork have grown considerably, increasing to $144 billion in 2018compared to $75 billion in 2009.
Source: Transportation in Canada, Statistical Addendum 2016, Table G2
2018 Canadian Rail Outflow by Commodity Share
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1
2
3
Regions in CERI’s Study
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Western Region– All Commodities Outflow in 2018 (Tonnes)
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The top 5 commodities are:
Coal (31,053,448)
Forest Products (7,987,262)
Miscellaneous (7,883,951)
Minerals (2,624,821)
Plastic and Chemical Products (1,271,165)
Prairies – All Commodities Outflow in 2018 (Tonnes)
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The top 5 commodities are:
Agricultural products (42,340,893)
Plastic and Chemical Products (15,779,964)
Fuel Oil and Crude Petroleum (9,031,835)
Minerals (5,096,093)
Food products (3,932,516)
Central Region– All Commodities Outflow in 2018 (Tonnes)
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The top 5 commodities are:
Miscellaneous (10,616,556)
Fuel Oil and Crude Petroleum (4,347,772)
Base Metals (4,182,760),
Forest Products (3,121,626)
Plastic and Chemical Products (2,481,440)
Atlantic Region – All Commodities Outflow in 2018 (Tonnes)
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The top 5 commodities are:
Mineral (19,540,082)
Miscellaneous (9,23,892)
Forest Products (359,929)
Automobiles and Transportation
Equipment (175,196)
Plastic and Chemical Products (123,476)
Canada Regional Commodity Outflow to U.S. & Mexico
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Canada Provincial Outflow to U.S. & Mexico 2015-2018
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Canada Commodity Inflow fromU.S. & Mexico, 2018
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Canada Provincial Inflow from U.S. & Mexico 2015-2018
Alberta Share, in 2018
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Alberta Share in the Prairie Region
Exports to the U.S. and Mexico 53.3%
Imports from U.S. and Mexico 73.9%
Alberta-Fuel Oil and Crude Petroleum Outflow Alberta-Plastic and Chemical Products Outflow
Regional Commodity Inflow/Outflow by Rail in 2018
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Canada Crude Oil Export by Rail
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0
50
100
150
200
250
300
350
400
2015 2016 2017 2018
x10^3 (bbl/day)
Source: CERI and NEB Government of Canada 2019
Supply Chain Overview
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CN CP Domestic
short lines
Port of Prince Rupert Port of Vancouver Port of Montreal Port of Halifax Port of Saint John Port of Toronto
Various shippers representing various economic sectors
Chicago (US) Mobile (US) New Orleans (US)
Supply Chain Challenges: Interview Results
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Lack of Commonly Accepted Metrics for Performance Delays and Network Congestion
Yards/Terminals & Ports Capacity
First Mile/Last Mile Issues
Unreliable Forecasting/Planning
Communication during Disruptions
SeasonalityOther
Challenges
Best Practices: Interview Results
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Sources of Data and Analysis
• Canadian Freight Analysis Framework (CFAF-Statistics Canada)
• Canadian Energy Futures 2019 (CER)
• FTR Transportation Intelligence
• Railway Association of Canada
• CN and CP Annual and Investment Reports
• Interview Results from Supply Chain Members
• Canadian Transportation Agency
• Alberta’s Industrial Heartland Association (AIHA)
• Chemistry Industry Association of Canada (CIAC)
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CERI’s Methodology
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• Multivariate Regression is used to model Freight transportationdemand for various origins and destinations.
• Annual investments are estimated at the national level using past,present and future national GDP projections.
CERI’s Rail Volume Growth Forecast
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Top 5 Commodities in 2025:
0
10
20
30
40
50
60
70
80
Wei
ght(M
t)
CERI Forecast: Regional CommodityInflow/Outflow by Rail
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CERI Forecast: Regional FUEL and PLCHM Inflow/Outflow by Rail
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Canada Crude Oil Export by Rail Forecast, 2025
30
0
200
400
600
800
1000
1200
1400
1600
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
('000
bpd
)
No Pipelines Line 3, no TMX and KXL Line 3 and TMX, no KXL Baseline - All 3 pipelines
Provincial Outflow Forecasts (%)
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Total Outflow Forecasts by Commodity (%)
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CERI’s Rail Investment Forecast
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CERI’s Railway Investment Forecast
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CERI’s Rail Investment Forecast by Category in 2025
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AIH Case Study: Additional Investment Req’s and GDP Impact
Conclusion
• Efficient and competitive national transportation system are closely related to productivity and income in Canada’s economy.
• Rail transportation improvements boost economic development in many sectors of national and provincial economies.
• Overall, freight weight moved by rail will increase by 14% between 2018 and 2025.
• The top five commodity groups are Agriculture, Petrochemicals, Coal, Minerals, and Forest products.
• Corridors that are anticipated to have higher traffic are between Prairie region to the West Coast and to the US/Mexico.
• Additional investment is required in the rail supply chain system in order to accommodate incremental freight volumes.
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Future Research
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While the CERI’s study was able to forecast commodity flows andinvestment, there is remaining research to be done. Potentialfuture research:
• Establish rail supply chain performance metrics
• Measure the rail capacity and congestion areas
• Examining the feasibility of extending the current supply chain
• Create a National Demand Growth Model
QUESTIONS?
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Please submit your text questions and comments using the Questions panel.
A recording of the presentation will be sent to you following the event.
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UPCOMING EVENTS
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February 11, 2020
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THANK YOUCanadian Energy Research Instituteceri_canada
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