Exxon official: Pipelines preferred, but railroads a viable option to move oil sands

HOUSTON – A senior Exxon official said the oil industry sees rail cars as a viable option to move growing amounts of Canadian oil sands to market, but he called development of multiple new pipelines the preferred option.

“When we look at long-term forecasts of oil sands growth, we believe that all of these pipelines will be needed over time to support the oil sands,” said Bruce March, an Exxon vice president, noting multiple proposals to build pipelines to the U.S. and other markets.

“The fact is that pipelines remain safest and most reliable way to transport crude oil and petroleum products,” said March, the former CEO of Exxon’s Canadian subsidiary Imperial Oil.

But March, speaking at the IHS CERAWeek energy conference here, said that while the industry wants pipelines, railroads are a viable option to handle growing production.

He said that there will be sufficient rail car capacity in 2015 to transport as much oil as the Keystone XL pipeline is projected to carry.

“Our industry is mitigating risk and trying to make sure that the oil sands grows as unencumbered as it possibly can,” he said in touting rail's ability to move production from Alberta's oil sands projects.

Railways already handle some oil sands. But asked if rail transit can support the long-term growth of oil sands production, March said, "I don't know that for sure."

At the same conference, ConocoPhillips CEO said the industry will eventually need new pipeline capacity for the oil sands.

In addition to Keystone, companies are proposing other projects, including Enbridge Inc.'s proposed pipeline that would carry oil sands west to the British Columbia coast for export.

“Some of them have to happen or the growth will slow down,” ConocoPhillips CEO Ryan Lance told reporters.

Meanwhile, environmental groups are pressuring the White House to reject the Alberta-to-Texas Keystone XL oil sands pipeline as oil and-gas companies push for that project and others like it.

Canadian oil sands production is currently 1.8 million barrels per day, according to Jackie Forrest, a senior analyst with IHS CERA, the research and consulting company holding the conference.

Production is expected to reach 3.2 million barrels per day in 2020 and 5 million barrels per day in 2030, according to the Canadian Association of Petroleum Producers.

The extent to which TransCanada Corp.’s proposed Keystone project will foster expanded development of Canadian oil sands is at the heart of the battle over the project, which is under Obama administration review.

Green groups say the project would worsen climate change by serving as a catalyst for carbon-intensive growth of oil sands production.

But a draft State Department report released last week dealt a tough blow to their efforts by concluding that the fate of the Keystone pipeline will not have much effect on the rate of future oil sands production.

— Updated at 10:06 a.m. and 11:02 a.m.