Company Name: Suncor Energy Inc

Transportation and Logistics Challenges in the Canadian Oil and Gas

Name: Pinang Patel

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1. Cover
Page ..................................................................................
..... 1
2. Table of
Contents ...........................................................................
1
3.
Introduction .....................................................................
................ 2
4. Problem
Identification ..................................................................
3
4.1 Industry
Overview .................................................................... 3
4.2 Transportation & Logistics
Integration ............................. 3
4.3 Key Challenges in the
Sector ............................................. 3
5. Problem
Statement .......................................................................
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6.
Conclusion .......................................................................
................ 5
6.1 Next
Steps ..................................................................................
5
6.2 Future
Considerations ......................................................... 5
7.
References .......................................................................
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Introduction
The Canadian economy depends heavily on the oil and gas industry which plays a
major role in national development, energy supply and trade worldwide. In the present
year, about 5.9% of Canada’s GDP comes from the sector and exports driven by this
sector are valued at over CAD 155 billion (data from Natural Resources Canada, 2023).
The industry also supports over half a million jobs by providing employment for many
and especially in Alberta where most of the oil discoveries happen.

There are a few main companies in charge, like Suncor Energy Inc., Canadian Natural
Resources Limited (CNRL), Cenovus Energy and Imperial Oil. Of all the companies,
Suncor Energy is one of the most connected and important in the industry. The main
office of Suncor is found in Calgary, while its activities cover the upstream, midstream
and downstream sides of the oil industry, working on oil sands, refining and selling
products at retail branches. The company’s revenue for 2023 reached over CAD 58.3
billion and produced 720,000 barrels of oil equivalent every day, according to its
financial statements (Suncor Energy, 2024).

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Being such a large country with resources often found far from people, Canada’s
resources industry needs strong transportation and logistics. The oil needs to be
transferred safely from production sites in Alberta which is landlocked, to nearby
refineries or to the coast for export. Pipelines are the main way the logistics network
works and rail and trucks are used for fast or emergency deliveries over short distances.
According to CAPP, about 89% of Canada’s oil exports are shipped by pipeline,
showing this method’s significance (CAPP, 2024).

Even so, logistics is a field that is still quite complex and keeps changing. It must deal
with problems due to aged infrastructure, laws and rules, environmental issues and the
rising demands from stakeholders who are interested in Indigenous concerns and eco-
safety. Because of more demand for Canadian crude from Asia and Europe, Canadian
oil companies have started to give high priority to export capacity and route
optimization.

The topic of this report is a major challenge in the logistical structure which impacts
Suncor Energy and the entire oil and gas ecosystem. It will reveal the key issue, give a
short problem statement and end by indicating how the next phase will test workable
solutions.

Prob
lem identification
Overview of Transportation Dependence

Much of the Canadian oil and gas industry’s operations are based on getting crude oil
from Alberta extraction sites to buyers at home and abroad. Pipelines are the cheapest
and fastest way, handling almost 89% of Canada’s crude oil exports (CANAPI, 2024).
For example, Suncor Energy Inc. which works in landlocked areas, depends on existing
pipelines to continue production and compete effectively.

Limited Pipeline Capacity An important issue is that the network of pipelines is not
large enough to handle both the current and expected amounts of output. Building the
Trans Mountain Expansion (TMX) and the Keystone XL pipeline has been held up,
reduced or stopped because of challenges from regulations, the environment and
politics. Due to these problems, transportation is strained and producers either reduce
their sales or offer them at reduced prices because they are unable to access major
demand markets.

Financial Implications for Suncor At times of pipeline congestion, Western Canadian

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reaching $40 per barrel (CAPP, 2024). Because of this discount, Suncor Energy’s
profitability is affected by its inability to get full value for its product. The company has
mentioned its operating costs going up as it relies more on rail and trucking for
transporting crude.

Transportation Now Depends More on Rail and Trucks

Because infrastructure is being pushed to its limits, companies including Suncor are
having to rely more on trains and trucks to move products. More costly, sometimes
reaching three times as much as the regular oil prices per barrel More dangerous,
demonstrated by the 2013 Lac-Megantic disaster ,More likely to be interrupted by
changes in the weather, equipment problems and worker walkouts More greenhouse
gases are produced which causes concerns about compliance with emissions reduction
policies in Canada Changing approaches like this increase expenses and lead to new
risks for worker safety and the public which may affect the company’s image and
investor confidence.

Difficulty in entering markets limits Brazil’s exports.

Canada still struggles with getting their goods to international markets. Most of the
pipelines that exist now are for the United States which means Canada depends too
much on a single customer. Since Asia and Europe are showing greater interest in
heavy crude, Suncor and other producers have difficulty reaching these new markets
because of the lack of suitable infrastructure. Not having a wide range of places to sell
their products leaves producers at risk from changes in policies, shifts in demand and
changes in prices in the U.S.

Problem Statement

First Option – Focusing on Finance and Operations

The lack of pipeline infrastructure in the Canadian oil and gas industry such as for
Suncor Energy, has increased its problems by raising transportation costs, limiting
output and making it difficult to sell to foreign markets.

Alternative Approach 2 – Focus on Strategy and Risk

As a result of the capacity and timing issues, the company must count on other, more
pricey and risky ways to transport goods which reduces its profit, efficient operations
and competitiveness

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Conclusion
Resolving transport and logistics issues in the Canadian oil and gas industry, for
example the issues faced by Suncor Energy due to their constrained pipeline network,
calls for a planned step-by-step approach. After that, the evaluation looks at how
currently used infrastructure stands, stakeholder wants and regulations and the various
means of transport available to design effective ways to enhance the supply chain and
improve access to the market.

The initial move involves understanding the views of stakeholders such as industry
players, people who make laws, Indigenous residents, environmentalists and
government departments. Identifying the different needs and concerns of the
stakeholders helps design infrastructure projects and logistics plans that are
sustainable, responsible and follow the rules. It will further help spot any conflicts and
chances for teamwork at the starting phase of the project.

At the same time, a careful review of pros, cons and risks should be done for existing
transportation options and new alternatives. Their assessments include checking
pipeline increases, rail plan upgrades, more effective trucking and combing methods to

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know which is safest and cost-effective. Looking at how profitability, safety, emissions
and market diversification could develop over the long run will lead to priority decisions.

It is also necessary to take a look at and reorganize the process for getting regulatory
permissions. If approval steps are sped up without letting the standards drop, more
projects can be completed promptly. It can mean that authorities and industrialists work
together to locate constraints and think of ways policies can support the economy,
protect the environment and honor Indigenous rights.

The interviewing analysis will be followed by a review that brings together the outcomes
of the previous analyses to suggest solutions that help overcome the mentioned
transportation issues. They hope to raise the amount of oil and gas transported,
improve the logistics of shipping and vary the routes used which will enhance the
strength of Canada’s oil and gas supply chain.

To end, managing the transportation and logistics issue in the oil and gas industry in
Canada depends on a well-planed, data-focused and team effort. It will start with
listening to what stakeholders say, conducting in-depth economic and risk evaluations
and reviewing the regulations. Having a solid strategy ready will support well-thought-
out actions in key stages of the project.

Citations

 The oil and gas sector contributes approximately 5.9% of Canada’s GDP and
supports over 500,000 jobs (Natural Resources Canada, 2023).
 Suncor Energy reported revenues of CAD 58.3 billion and production of over
720,000 barrels of oil equivalent per day in 2023 (Suncor Energy, 2024).
 Approximately 89% of Canadian crude oil exports are transported by pipeline
(Canadian Association of Petroleum Producers [CAPP], 2024).
 The price differential between Western Canadian Select and West Texas
Intermediate reached up to USD 40 per barrel during pipeline congestion (CAPP,
2024).
 The 2013 Lac-Marantic rail disaster highlighted the risks associated with rail
transport of crude oil (Transportation Safety Board of Canada, 2014).

References

Canadian Association of Petroleum Producers. (2024). Crude oil transportation in

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Natural Resources Canada. (2023). Energy sector contribution to the Canadian
economy. Government of Canada. https://www.nrcan.gc.ca/energy

Suncor Energy Inc. (2024). Annual report 2023. https://www.suncor.com/investor-

Transportation Safety Board of Canada. (2014). Railway investigation report R13D0054: Lac-
Mégantic derailment.
https://www.tsb.gc.ca/eng/rapports-reports/rail/2013/r13d0054/r13d0054.html