CN Railway profit rises as crude oil shipments increase
By Scott Haggett and Solarina Ho
(Reuters) - Canadian National Railway (CNR.TO: Quote), Canada's largest railroad, said on Monday it expects the boom in crude-by-rail shipments to continue, despite the Lac-Megantic tragedy earlier this month and as narrowing spreads between benchmark world oil prices raise questions about the economics of rail transport.
The company reported an 11 percent rise in adjusted profit for the second quarter and said its oil shipments grew by 150 percent from the year-earlier period, boosting revenue by about C$100 million ($96.7 million). It said that growth would likely continue over the next 18 months.
Moving crude oil by rail is becoming increasingly popular in North America as oil output surges and environmental opposition and regulatory issues delay pipeline projects.
Industry players estimate that Canada will export more than 200,000 barrels of crude oil by rail per day to the United States by the end of 2013, more than four times the average of 46,000 a day in 2012.
"We still believe there will be an increase in the volume," Jean-Jacques Ruest, CN's chief marketing officer, said on a conference call. "The (percentage growth) may not be the same because the base is getting bigger, but there is still a likelihood that crude-by-rail will continue to rise in volume."
The forecast comes despite a deadly accident in Lac-Megantic, Quebec, earlier this month, when a runaway crude oil train operated by small company Montreal Maine & Atlantic derailed and exploded, killing 47 people and devastating the small town.
CN said it is reviewing all its safety procedures in the wake of the tragedy.
The growth forecast also comes despite narrowing price differentials between Canadian crude and the West Texas Intermediate (WTI) benchmark in recent months, which raised questions over whether the opportunity of using costly rail transport to ship crude to U.S. markets is still viable. Continued...