Crude Loves Rocking Rail – EOG, Hess and Inergy Terminals in the Bakken

EOG

EOG Resources is a top Bakken crude oil producer. At the end of 2012 EOG Bakken gross crude production was 63 Mb/d. EOG was the pioneer of the crude-by-rail resurgence in North America, building the first unit train facility in the Bakken – in service during December 2009. While much of the industry thought EOG was grasping at an antiquated technology, EOG ignored the disparagement and succeeded in redefining the economics of crude oil transportation.  EOG’s terminal in Stanley, ND (Montrail County) is dedicated to the company’s proprietary production and additional crude that the company purchases.  The Stanley terminal can load 65 Mb/d of crude, has 240 MBbl of storage capacity, is operated by Watco Services, and is located on the north segment of the BNSF rail line. A Hawthorne Oil Transportation lateral pipeline links the EOG Stanley terminal to the Bridger Four Bears crude pipeline.

EOG ships all their Bakken crude to a company owned terminal operated by NuStar at St. James, LA (see Back to the Delta). Under a joint venture agreement with NuStar EOG has exclusive use of 80 Mb/d rail offloading at the 100 Mb/d St. James terminal.  EOG owns 1700 rail tank cars that are used to ship oil from the Bakken as well as from the Eagle Ford in South Texas. In addition to St. James, EOG has a rail offload facility in Cushing, OK. The Cushing facility was the original destination that EOG sent crude by rail from the Bakken in 2010. That was before Midwest crude supplies exceeded refinery demand causing a stockpile and price discounts at Cushing versus coastal destinations like St. James where prices for Bakken crude are up to $20/Bbl higher than Cushing.

Hess

Hess Corporation is the largest gas producer and the third-largest oil producer in North Dakota. They opened the Tioga Rail Terminal (TRT) in Williams County, ND on the BNSF north segment rail line during November 2011. Hess also has a large gas processing plant at Tioga. The TRT is operated by Watco Services for Hess and is able to handle unit trains with 104 cars using a 21 station loading rack. The facility can load ~70 MBbl onto each train and handle up to two unit trains per day. The TRT is fed by a Hess pipeline gathering system as well as a truck offloading facility that can move approximately 1000 trucks a week. The TRT facility has 180 MBbl of storage as well as an oil stabilization facility to condition oil before loading onto rail cars. Hess owns a fleet of 9 train sets (104 * 9 = 936 rail tank cars). In addition to rail takeaway capacity, Hess can also deliver to the Tesoro High Plains pipeline that feeds the local Tesoro Mandan refinery (80 Mb/d).

Hess ships their own production – the company reported volumes in the final quarter of 2012 above 60 Mb/d of oil equivalent. Hess is transitioning away from the downstream oil refining business having recently announced the closure of its Port Reading, NJ refinery. Company presentation materials suggest that Hess is shipping Bakken crude to St. James, LA (direct on BNSF) and also to the Sunoco Logistics Eagle Point terminal at Camden, NJ that was previously the site of Sunoco’s shuttered Eagle Point Refinery. The Eagle Point terminal is on the Delaware River providing waterborne access to US East Coast refineries.

Source: Hess Presentation January 2012 (Click to Enlarge)

Merchant Terminals

Unlike the Hess and EOG terminals that ship their own production exclusively, merchant rail terminals are third party fee for service facilities that provide crude truck unloading as well as storage, blending, rail loading and pipeline connections. These merchant operations are similar in functionality to the Gulf Coast crude terminals that we covered recently (see Gulf Coast Crude Oil Flood Preparations). In this episode we will cover the largest of these merchant terminals – the COLT terminal at Ewing, ND.

Inergy

Inergy Midstream, L.P is a master limited partnership (MLP – see Masters of the Midstream) that until the end of 2012 operated natural gas and NGL storage, transportation, and logistics businesses in the Northeast United States and South Texas. On December 7, 2012, Inergy completed the $425MM acquisition of Rangeland Energy and expanded into the crude oil terminal business in North Dakota.

Rangeland Energy now operates the COLT Hub in Epping, ND (Williams County) for Inergy. COLT is located on the northern segment of the BNSF mainline (see map below). The COLT Hub - placed in service in May 2012 - includes a rail terminal capable of loading more than 120 Mb/d onto a unit train in 12 hours, a truck unloading facility that can handle 64 Mb/d, and 600 MBbl of crude oil storage. The COLT terminal at Epping has connections to the Banner and Bear (Belle Fourche) pipeline gathering systems. COLT is also linked to the Dry Fork terminal at the Beaver Lodge/Ramberg pipeline hub by a 21-mile bi-directional 70 Mb/d crude oil “connector” pipeline.  Dry Fork has interconnects to the Enbridge and Tesoro crude oil interstate pipelines. Beaver Lodge has an additional 120 MBbl of storage capacity.

The COLT system provides producers, marketers and refiners with the largest open-access crude oil marketing hub in North Dakota and has aggregate contracted volume commitments in excess of 135 Mb/d (source Rangeland, August 2012).

Source: Rangeland Presentation August 2012 and RBN Energy (Click to Enlarge)

 

Next Time on Terminals

The first three terminals detailed in this blog are among the largest and between them can load 250 Mb/d of crude onto rail cars - about 32 percent of the latest December 2012 total crude production estimate for North Dakota of 770 Mb/d. The three terminals are all located on the BNSF rail system, giving them access to East, West and Gulf Coast destination terminals. The current favored destination for EOG and Hess is St. James, LA. Our next episode will provide similar detail about three more large midstream energy merchant terminal operators in North Dakota – Plains All American, Global Energy Partners and Enbridge. After that we will cover Dakota Plains, Savage and Great Northern as well as the smaller North Dakota terminals. Later in the series we will examine rail transport costs and how to choose optimal destinations.

 

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