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Calgary – As some of the biggest players in Canada’s oil industry fight for proposals to move the product west, south and east, a new plan is emerging to move crude north.
Omnitrax Inc., a private U.S. company that owns Churchill, Man.’s port, may provide a new channel for moving crude to markets on both sides of the Atlantic Ocean.
The Denver-based company, which also owns Manitoba’s northern railway, is nearing a test run to ship oil through its system as part of an ambitious plan that could see Western Canadian crude moving for the first time to Europe’s largest port via tanker across Hudson Bay.
If the plan is realized, it would run counter to long-established crude oil flows, in which east coast Canadian refineries have imported their feedstock from North Sea and Middle East suppliers.
It is also among a growing number of potential options for diversifying oil exports as production climbs and major pipeline proposals face lengthy regulatory delays.
Under the plans by Omnitrax, light-grade crude from Alberta and the Saskatchewan-North Dakota Bakken region, shipped to Churchill on its Hudson Bay Railway, could also feed refineries on the East Coast of North America.
Omnitrax made headlines early this week when Manitoba Conservative MP Merv Tweed resigned from the government to become president of the company.
“Western Canadian crude has never moved to Rotterdam, and we think that competitively – and we’re talking about much smaller vessels than you would get out of Saudi Arabia, for example – we could serve that market,” said Mike Ogborn, an adviser to the board of Omnitrax.
The company plans to spend $2-million on a trial run as early as October so it can make adjustments to the port facilities. If approved by Transport Canada, the commercial phase – the loading of 10 tankers per season – would cost a “multiple of millions of dollars” to beef up the pipeline needed to transfer oil to ships, add pumps and install a new storage tank, he said. Omnitrax aims to start shipments next year or in 2015.
Omnitrax is proposing the plan as Canadian oil producers seek to move crude by train to overcome delays in pipeline projects. Those delays have constrained shipments and have consequently helped to lower prices for Western Canadian crude relative to U.S. and international oil prices.
Omnitrax has been in contact with about 25 oil producers as it seeks to attract volumes to Churchill, the northern harbor that is ice-free from July to October, Mr. Ogborn said. He did not name the companies courted as potential shippers. Omnitrax is seeking to bolster the types of cargo it handles at the port, which is a northern supply centre but also a facility that had long been dependent on grain exports by the Canadian Wheat Board, which lost its monopoly on such business last year.
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