CP May Delay Plans for Oil-Sands Track
Published: November 17th 2008
Canadian Pacific Railway Ltd. may delay plans to build a line linking
refineries near Alberta's oil sands to its main southbound routes if customer
demand doesn't emerge, Chief Executive Officer Fred Green said.
``If there is a large customer or customers who are proceeding, then we will build and if not, we'll defer until such time as they do build,'' Green said today in a telephone interview from the company's Calgary headquarters. The decision probably will be made in early 2009, he said.
Canadian Pacific, the nation's second-largest railroad, is weighing its plans as oil companies rein in spending in the Alberta region, which according to the Canadian Association of Petroleum Producers holds the world's biggest energy reserves outside Saudi Arabia. The price of crude oil has tumbled to less than half its record of $147 a barrel in July.
Royal Dutch Shell Plc, Calgary-based Suncor Energy Inc. and EnCana Corp. have said they will scale back plans to extract bitumen, the tar-like raw material for crude oil, in the region. The Canadian trade group reduced its forecast for spending next year on oil-sands pipelines, mines and plant improvements by 20 percent to C$16 billion ($13.6 billion).
The oil-sands line would give Canadian Pacific another revenue source, as the railroad relies on cargo such as sulfur, coal, grain and fertilizers while a slowing U.S. economy curbs demand for shipments of autos, lumber and construction materials.
The planned 16-mile (26-kilometer) track would carry oil byproducts such as sulfur and petroleum coke and boost shipments of those chemicals by as much as 200,000 carloads, or an increase of 7.4 percent from total 2007 deliveries, Green said in May.
``The figure is still accurate, but the timing is different,'' he said today. Green has said the line may cost C$100 million.
Canadian Pacific fell C$5.42, or 11 percent, to C$42.21 at 4:15 p.m. in Toronto Stock Exchange trading, the lowest close since July 13, 2005. The stock has dropped 34 percent this year.
Canadian National Railway Co. is the nation's largest railroad.
Bloomberg -- With reporting by Daniel Whitten in Washington D.C. Editor: John Lear