Do Ya Think I’m Waxy?, Part 3 - A Crude-by-Rail Project Advances in the Uinta Basin

There are a number of reasons why certain U.S. refineries might want to include waxy crude oil from Utah’s Uinta Basin in their crude slates — the highly paraffinic oil has a lot of neat qualities. But waxy crude can be a hard sell, mostly because, like bacon fat, it needs to be kept warm to remain in a liquid, flowable state. As a result, the vast majority of the waxy crude produced is driven in insulated tanker trucks to refineries in nearby Salt Lake City. Uinta producers have been making progress of late, however, in sending regular shipments of waxy crude in coiled and insulated railcars to a couple of Gulf Coast refineries. Existing terminals would support incremental growth, and a proposed new railroad out of the basin would allow far larger volumes to be efficiently railed to market. In today’s RBN blog, we continue our look at the prospects for a most unusual type of crude oil.

There’s a lot to like about the unusual, waxy crude oil produced in the Uinta Basin in northeastern Utah. Low production costs, minimal sulfur content, next-to-no contaminants, and favorable medium-to-high API numbers. Oh, and there’s plenty of the stuff — huge reserves. The catch is that waxy crude has a shoe-polish-like consistency at room temperature, and has to be heated into a liquid state for storage and transportation. As you’d expect, refineries in nearby Salt Lake City are regular buyers; they receive waxy crude via insulated tanker trucks. They can only use so much though. Lately, a couple of Gulf Coast refineries have been railing in occasional shipments of waxy crude, but getting it onto heated rail cars involves a white-knuckle tanker-truck drive across a 9,100-foot-high mountain pass to a transloading facility. Now, finally, crude-by-rail access from the heart of the Uinta is poised to become a reality, offering the potential for much easier access to distant markets and, possibly, a big boost in Uinta production. In today’s blog, we provide an update on waxy crude and its prospects.

Each and every production region in the U.S. has its own unique geology, geography and hydrocarbon assets, but few, if any, are more unusual than the Uinta Basin in northeastern Utah. Physically isolated from all refining centers except Salt Lake City, the region boasts enormous reserves of waxy crude oil that’s been made accessible at a very low cost per barrel via horizontal drilling and hydraulic fracturing. While Uinta Basin crude looks, smells and feels like shoe polish, it has many characteristics that refiners want, including medium-to-high API gravity and very low sulfur, acid and metal content. There are two snags to expanding production, though: waxy crude poses major transport challenges, and Salt Lake City refineries can only use so much of the stuff. So if Uinta Basin producers want to increase production by much, they’ll need to develop cost-effective ways to move large volumes of their waxy crude to faraway markets like the Gulf and West coasts. Today, we continue a series on the prospects for expanding waxy-oil output with a review of Uinta Basin producers and their customers in the close-by “City of the Saints.”