Introducing: CanaRail ULC
The start-up of UET CanaRail ULC in July 2012 marked a significant expansion of the UET crude oil business footprint- to an international presence in the western Canadian crude oil basins. For several years now, UET has been noting the rapid increase in oil sands production in northern Alberta, which in combination with the associated lack of sufficient pipeline capacity to U.S. markets has resulted in the same opportunities for rail transportation of crude oil to market that we have exploited in the United States. In fact, these opportunities have become more substantial in their business potential with the difficulties that the Keystone XL Pipeline has had with respect to approvals for construction.
To capitalize on these opportunities, we created UET CanaRail ULC in June 2012; leased our first 300 steam-coiled rail cars in July 2012; and began to rail heavy Canadian diluted bitumen in the same month. The vast majority of western Canadian crude oil is so heavy that specialized, insulated rail cars with steam coils are needed to retain the crudes’ warmth so that it can be transported both during and after the rail journey. UET received an additional 300 of such rail cars in late 2012 and anticipate an additional 1000 of such cars to be released to UET in a new car build late in 2013.
As was the case in the Bakken and Niobrara Shales, UET is one of the very first to be railing significant quantities of heavy Canadian crude to markets. As a first mover, we have strategically positioned ourselves in the optimal loading sites – ones that have potential to be pipeline connected, unit railing operations capable of movement on either Canadian railroad. CanaRail is now loading Canadian heavy crudes from one rail origin in Alberta and is transporting this product to the U.S. gulf coast. Our scale and scope of operations will be increasing commensurate with rail car fleet and evolution of a ramp up period. We believe that the potential scale and longevity of this business line will ultimately dwarf the other crude-by-rail operations. It is our vision that UET CanaRail will be one of the largest, if not THE largest crude-by-rail shipper of Canadian crude oil from constrained production area directly to markets.