Economics of Bitumen vs. Rail Transport

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that can be shipped with either method; dilbit, railbit and raw bitumen. Dilbit is raw bitumen blended with a diluent, usually dilbit has a blend of 30% diluent and 70% raw bitumen. Dilbit is the only product that can be shipped via pipeline due to restrictions of flow and policy. Railbit is very similar to that of dilbit, but has a lower blend of diluent to raw bitumen, 17% diluent and 83% raw bitumen.

In order to determine the economic differences of the three cases listed above several factors had to be assumed:

* The value of dilbit, railbit and raw bitumen at consumer selling point were kept constant at values of $71.00, $80.00 and $90.00 respectively (blended product values include the value of raw bitumen and diluent in the mixture).

* WTI discount was not taken into account for the value of bitumen.

* Current (or future in the case of the northern gateway) shipping capacity for rail and pipeline are 700,000 bbl/day and 525,000 bbl/day respectively.

* In ...

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type of train system used. Whereas shipping diluted product through the NGP costs $18.50/bbl.

Above we saw a breakdown of just the shipping costs associated with each case, below we factor in the value of each product of which it can be sold at market. This is considered the overall netback a company can expect on a per barrel basis:

We can see that the greatest netbacks are via rail transport of raw bitumen. We can also see that transport via pipeline has a netback of $20.00/bbl less than raw bitumen rail transport.

Mathematically we can see that shipping raw bitumen through rail is the best option. But looking at the overall picture, transport of raw bitumen is very ...

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