Crude Loves Rock'n'Rail

During the past two years the US domestic crude transportation business has been revitalized by a huge increase in shipments of crude oil by rail. In the Bakken region alone over 600 Mb/d of crude is shipped to market by rail. The number of rail terminals in producing regions loading crude oil onto rail tank cars has increased from a handful at the end of 2011 to 88 and growing today. A further 66 crude oil unloading terminals have been built or are under construction. Today we summarize the crude oil terminal build out by region and by railroad.

In the short term midstream companies with crude-by-rail unloading terminals at the Gulf Coast can deliver cheaper light sweet crudes from the Midwest and West Texas. Once new pipelines come online to deliver that crude direct to Houston that price advantage will disappear. At that point rail terminal operators need to diversify their business to survive.  Today we look at the fate of Texas Gulf Coast rail terminal operators.

As much as 240 Mb/d of light sweet crude from North Dakota is currently being shipped from the Bakken to St. James LA in what has become a pipeline on wheels. More crude is also moving to the Gulf Coast from Western Canada by rail and new destination terminals are being developed along the Mississippi River. But increased pipeline capacity to the Gulf Coast is a growing competitive threat to these rail destinations. Today we survey rail destination terminals East of the Mississippi.

Last June (2012) the largest refinery on the East Coast was on the brink of closing - in part due to higher international crude prices (versus US inland grades). Since then the 330 Mb/d Philadelphia Energy Solutions refinery has reopened and along with several of its competitors the new owners have developed means to get access to lower priced crude from North Dakota and Western Canada using rail. Today’s episode of our continuing crude by rail series is a survey of East Coast rail offloading facilities. 

Western Canadian heavy crude oil producers have a lot of rail tank cars on order but so far none of the loading terminals in the production region can handle unit trains. The pace of terminal development in Alberta is far slower than North Dakota in 2012. Because you can ship raw bitumen without diluent there are potential cost savings over pipelines but the load and offload facilities are more complex. Today we conclude our mini survey of Canadian heavy crude loading terminals.

The dramatic growth in North Dakota crude by rail during 2012 included large unit train terminals built to load 80 Mb/d or more. At the same time smaller companies successfully operated alongside the big guys – loading manifest trains at out-of-the-way terminals. North of the border in Saskatchewan, Canadian railroads are advertising their terminal facilities but most have limited capacity. Today we continue our crude by rail series with a look at the plethora [1] of smaller Bakken terminals.

North Dakota Bakken crude production continues to grow at record rates with nearly 770 Mb/d produced in December 2012 up 40 percent since January 2012. The North Dakota Pipeline Authority estimates that 64 percent of that crude was transported to market by rail in December. After local refinery consumption (80 Mb/d) that means 440 Mb/d moving by rail. Today we continue our survey of North Dakota crude rail loading terminals with an in-depth look at three midstream companies that between them can potentialy load 280 Mb/d of crude in North Dakota.