W&T's costs are far less both for production and transportation.
The Financial Post reports in its Friday, Aug. 24, edition that anxious about pipeline capacity, Southern Pacific Resources (STP) recently threw its full weight behind rail, committing to transport its entire output through Canadian National Railway and its partners. The Post's Yadullah Hussain writes that while rail companies have seen roaring business from their crude-by-rail operations in the past few years, no other oil producer before had committed its entire bitumen output to CN long term, completely bypassing pipelines. It certainly put a dent in the theory that crude-by-rail is a temporary business. STP chief financial officer Howard Bolinger cites "future risk of pipeline capacity availability" in Alberta as one of the reasons for the deal. Under the contract starting in the fourth quarter, STP plans to truck 12,000 barrels per day from its McKay plant to CN's terminal in Lynton, Alta., from where it will head south 4,500 kilometres to a terminal in Natchez, Miss. It will then be hauled on barges to Gulf refineries. STP's transportation bill will be a whopping $31 per barrel, but it will still manage higher netbacks of an additional $18 compared with pipelines as it will fetch Brent prices.