Rail use at Irving Oil refinery in Saint John drops to 10%
About 33% of crude used to arrive by tank cars a couple years ago, says COO Mark Sherman
The amount of crude oil arriving by rail at Irving Oil Ltd.'s refinery in Saint John has been reduced to less than 10 per cent of the overall amount, says the chief operating officer.
Just a couple of years ago, "almost a third of our intake of crude was coming in by train," said Mark Sherman.
"Today, we'd be running roughly 20 to 25 thousand barrels a day of western Canadian crude — some of it synthetic crude."
The remainder is coming by boat, he said.
The refinery's capacity is about 300,000 barrels per day.
They also come in the midst of an ongoing debate about whether transporting oil is safer by rail or pipeline.
Many Saint John residents have expressed concern about the amount of rail cars passing through the city carrying crude in the wake of the Lac-Mégantic disaster, which killed 47 people in July 2013.
Rail use could rebound
Bridget Hunsucker, an analyst with Genscape, is predicting a quick resurgence of oil by rail traffic across the continent.
"We are hearing that there is going to be a return to crude by rail," said Hunsucker, who is based in Sugarland, Texas.
"For one thing, we still see many investors out there looking at building rail terminals, especially in western Canada. On recent earnings calls, several companies — U.S. Development, Valero and PBF Energy, to name a few — all mention that they expect rail volumes to come back in Q4, so I don't think it's going away any time soon."
Sherman did not rule out a return to greater use of rail tank cars. "It's really market driven," he said.
"If the spreads [in price] between west Texas intermediate crude and Brent [offshore crude] made it viable to do that, we would."
But the incentive to do so is currently diminished, he said.
The drop in volume of oil coming to the refinery by rail means far fewer crude tank cars are entering Saint John.
Each tank car can carry about 700 barrels of crude oil, so about 28 rail tank cars are required to carry the current estimated 20,000 barrels.
By comparison, 142 tank cars would have been required daily when a third of the refinery's capacity was arriving by rail.