Turning Tanker Rail Cars into Internet Enabled Things

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Turning Tanker Rail Cars into Internet Enabled Things

With the Canadian pipeline industry struggling to gain speedy approval for new infrastructure, the oil industry is turning to rail transportation. Could digital innovation make a difference to rail’s performance?


Oil on Rail

Oil and petroleum products have always been shipped on rail. And why not? The rail network is very extensive, with lines reaching out into every nook and cranny of the country. Rail moves pretty much all of Canada’s bulk commodities to market, including coal, sulphur, ores of all kinds like uranium and copper, timber, and grains. For many resources, rail is the only practical way to move bulky products to market. Provided they can do so safely, rail companies are quite willing to move virtually anything from point A to B. 

Rail is much more cost effective than trucking, and far safer. A single unit train of 100 cars displaces 100 trucks or more on the highways, something we can all be thankful for, as vehicle accidents are still a leading cause of death in North America. Of course, some commodities like coal can only be shipped on rail, while other commodities like oil could be shipped via truck, rail or pipeline, and some, like gas, are pretty much pipeline only. 

Rail is more capital intense than pipelines, one reason why it costs more. A double hulled crude oil tank car, called a DOT 117, holds 500-700 barrels of oil, and a standard unit train is 100 cars (sized to match track conditions like grade, curves, and bridge decks), yielding on average a 60,000 barrel total cargo. The biggest oil tanker Vancouver harbour can accomodate is the Aframax-sized tankers which hold 750,000 barrels, or ~13 unit trains.

You can immediately see the scale problem mounting—to fill one Aframax ship every day would take 1 large pipeline or ~1250 rail cars in 13 trains, with one unit train arriving and unloading every two hours, around the clock. But it’s not 13 trains, because it takes 10 days load/haul/unload/return from Ft Mac to Vancouver. It would take 130 unit trains, 12,500 rail cars, 130 locomotives and crew, siding space for all the trains, and so forth.

Rail’s incident record is worse than that of pipelines. In fact, rail mishaps are frequent and often not even widely reported, unless the incident involves fatalities, or is sufficiently colossal to show a photogenic jumble of rail cars. It’s not surprising, really. Rail lines shrink and expand in the weather, rail beds erode with flooding, and bridges weaken. Rail cars jump off the tracks with distressing regularity. In many countries, people still ignore the dangers of level rail crossings, despite gongs, flashing lights and barricades. Animals that stray onto the tracks to feast on fallen grains do not survive their encounters with fast moving freight.

In the end, rail costs more than moving oil by pipeline and has a worse safety record, but rail is more flexible, permitted and in place, and so far, no one has figured out how to halt the rail in this country (but never underestimate the present governments).  

Rail Challenges

Movement of liquids by rail is complicated. There are a lot of players in the market that need to work together to solve the challenges of crude oil on rail to make it as safe as possible. 

First in line are the car manufacturers. Rail cars are big and heavy, and there are few companies involved in the manufacture of all the different car types. Lessors purchase the rolling stock from the manufacturer, and lease the cars out on contracts to their customers. To complicate matters, some of the manufacturers are also lessors. Shippers match buyers and sellers of oil and purchase space on the leased cars to move the oil from point A to B. Sellers of oil arrange to deliver their crude oil to terminal operators, who house the oil in storage tanks until the shipper’s cars are ready for loading on one end, and unloading at the other. Actual loading and unloading operations are provided by transloaders. Finally, the loaded cars are matched to a train and hauled by the carrier, or rail operator. 

The players have different economic drivers and motivations. The tank car makers have a competing order board, so they manufacture the car with the highest margin, which might not be a tank car. The lessors rely on low cost capital and strong demand for crude by rail (during the 2014 price crash, much of the fleet was laid up). The shippers prefer the lower cost, higher reliability of pipeline to rail. The terminal operators, another capital intensive business, value throughput, turnover and high asset utilization (keep the line moving). The transloaders treasure safety (don’t overfill the cars, unload them as quickly as possible).  

Now try running this business with the tank car as an off-line asset. In an era of Amazon and Uber, we know exactly when our parcel or lift will arrive, yet our crude oil by rail runs blind. 

The transloaders face an additional problem—crude oil expands in volume as its temperature rises. To be on the safe side, compensating for this temperature-volume uncertainty, transloaders under-fill the tank cars to give the product some breathing space.  

Additionally, transloaders cannot be certain that every drop of oil is drained on delivery because there’s no precise reading of the contents of the rail car (they have to dip a stick into the car as it’s being emptied, and viscous oil clings to the sides of cars). Opening the man-cap to peer inside is hazardous because of the fumes.

Data measurement by dip stick is inaccurate. As cars are routinely under-filled and the residual after unloading (or heel) ranges from 2-5%, on a unit train of 100 cars,  2-5 cars shuttle back and forth effectively full and an equal number effectively empty. Transloaders tell stories of tank cars that travel from one end of the country to the other that are never even unloaded. 

These system losses trigger the employment of an army of checkers, reconcilers, expeditors, and clerks to make sense of it all after the fact. Not to mention the excess carbon load on the environment. 

The precise whereabouts of a crude oil shipment is unknown. There are visual readers that log rail cars as they move throughout the system, but graffiti, rust, dirt and weather make visual readings unreliable. Rail only guarantees a 16 day delivery window. This might be good enough for shifting coal to a coal terminal, but it’s not good enough with a 24/7 refinery with limited inventory on the other end of the line, or a ship incurring demurrage in harbour.

A Digital Solution

Two digital technologies are coming together to give oil-by-rail a much needed boost in performance. 

Internet of things

Imagine a low cost sensor with a small physical footprint and low power needs that can be fitted to the top of a tank car to broadcast the car’s GPS whereabouts as it travels. It’s not perfect—cell coverage isn’t 100% (yet), but it brings Uber visibility to the cargo, the car’s contents, its current temperature and pressure and other useful vital signs.

Imagine a second sensor that monitors loading and unloading, to see that the tank car is filled to the optimum level, and is fully drained. Worker safety improves by eliminating exposure to fumes and to working at height.

This precise data eliminates excess inventory, all the reconciliation activity, loss management record keeping, disputes and delayed payments. Cash flow improves and the carbon footprint measurably improves.

Such sensor technology exists. TransRail Innovation Group (or TRIG) has this kit certified and ready to deploy. 

Cloud computing

Imagine all this data from tank cars was somehow available to all the industry participants at the same time. Cloud computing makes this possible, eliminating separate systems, spreadsheets and other manual efforts to track cargos. 

All the data from cars could be fed into cloud analytics to surface bottlenecks, system constraints, trapped capacity and performance improvements. 

Of course, cloud computing exists too. As I’ve previously written, cloud computing is the engine that transforms these processes.  

Next Steps

As Alberta proceeds with its large tank car order, it should equally be trying to deliver against its other agendas, including nurturing its technology sector, creating demand for high end analytical work, and improving the province’s brand as a center for high tech innovation. Insisting that its new tank cars be digital, safe, and free from wooden dip sticks, would be a start.


Mobile: ☎️ +1(587)830-6900
email: 📧 geoff@geoffreycann.com
website: 🖥 geoffreycann.com
LinkedIn: 🔵 www.linkedin.com/in/digitalstrategyoilgas

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