July 30, 2015 – Railway Age
Is Bakken CBR fading away?
By: William C. Vantuono
Bakken crude oil hauled in unit trains may disappear by 2017, according to an analysis conducted by RBN Energy LLC.
“Bakken crude-by-rail (CBR) volumes are down this year and pipeline shipments are increasing as production levels off in the wake of last year's price crash,” says RBN’s Rusty Braziel. “The trend is encouraged by lower price differentials between domestic and international crude as well as new pipelines coming online. Since 2012 a combination of rail and pipeline has given Bakken producers ample crude takeaway capacity but pipelines alone have not had sufficient capacity on their own. However, with production slowing down, pipeline capacity is catching up, and by 2017 there should be enough pipelines to carry all North Dakota's crude to market.”
RBN Director Energy Analytics Sandy Fielden, in the first installment of a two-part editorial, “The End of The Line - Could Bakken Crude-by-Rail Shipments Disappear?,” examines whether pipelines can replace CBR from North Dakota.
“As long as the price differentials between discounted domestic crude stranded in the Midwest and coastal crude priced at higher international prices stayed wide enough, rail was an ideal option for Bakken producers, especially to the East and West Coasts where there is no pipeline capacity,” Fielden writes. “As soon as price differentials—especially between domestic benchmark West Texas Intermediate (WTI) and international benchmark Brent—narrowed, then barrels shifted back to pipelines to take advantage of their cheaper tariff rates. Yet significant crude volumes continued to be transported to market from North Dakota by rail because pipeline capacity could not handle the demand. More recently, we have described the planning and buildout of a series of new pipelines out of North Dakota that (if they are all built) should increase capacity enough to provide space for all the barrels currently traveling to market from North Dakota by rail.”
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