Comparing the economics of shipping heavy crude oil or bitumen on pipeline versus rail requires understanding the following concepts:
- Normalization of units shipped
- The diluent penalty
- Embedded costs that aren’t readily apparent
The following chart summarizes the example of shipping one barrel (42 US gallons) of pure bitumen 2,500 miles from the Fort McMurray area to the US Gulf coast. Origin gathering and destination distribution are not considered since in both cases the oil has to be brought to either the pipe head or rail head by truck or pipeline at origin and distributed at destination by local distribution networks.
Rail costs assume loading 567 barrels of 956 kg/m3 at 15ºC (12API) undiluted bitumen into 25,330 US gallon tank cars with a track weight limitation of 268,000 gross weight on rail (GWoR). Rail rates are calculated using the American Association of Railways published 2015 cents per ton-mile average rail rates for all services all types of commodities (generic rail rate, non-negotiated).