Enbridge Inc (USA) (ENB), Suncor Energy Inc. (USA) (SU): Looming Supply Shortage in the Oil Sands

Railroads don’t require bitumen producers to use diluent in their shipments. Rising condensate prices will only make crude-by-rail shipments more attractive.

Canadian National Railway (USA) (NYSE:CNI) is a big beneficiary of this trend. Analysts project crude by rail shipments to reach 110,000 b/d by the end of the year. By 2015, CN is projected to ship 300,000 b/d with crude shipments accounting for 7%-8% of revenues. However, the growing condensate shortage may force analysts to raise those expectations.

There’s only one hiccup in this story – railroads are struggling to meet rising shipping demand due to a shortage for rail cars and loading terminal facilities.

Foolish bottom line

Rising condensate prices is just another addition to the growing list of challenges plaguing the Canadian oil patch. Chronic labor shortage, pipeline gridlock, and environmental activism are making the economics of operating in this space more challenging.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool recommends Canadian National Railway.

The article Looming Supply Shortage in the Oil Sands originally appeared on Fool.com.

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