September 06, 2012

Bakken Oil Rail Shipping Capacity increased to 1 millinon barrels per day

Bloomberg - Bakken oil traded at the most expensive compared with West Texas Intermediate in four months as Burlington Northern Santa Fe boosted crude rail shipping capacity for the grade to 1 million barrels a day.

This seems to suggest that railroad and oil companies are expecting the oil from North Dakota to increase 660,000 bpd to over 1.1 million bpd in 2013 and 2014.

The increase of more than 25 percent over the past year covers shipments of crude from the Bakken-producing Williston Basin region in North Dakota and Montana.

Bakken strengthened $4 to a premium of $1 above the U.S. benchmark at 3:54 p.m. in New York, according to data compiled by Bloomberg. That’s the most expensive the graded has traded at since May 3.

Canadian oils also strengthened. Syncrude’s premium added $6.25 to $8.25 above WTI. Western Canada Select’s discount to West Texas Intermediate narrowed $4.50 to $11.50 a barrel.

CNBC - About 62 percent of Bakken crude is shipped out of the region by pipelines now, while about 25 percent currently goes by rail and the balance by truck. That ratio will fluctuate as there are major projects under way to add capacity for both rail and pipelines, but the pipeline work in particular will take years to complete, giving the railroads a leg up for now.

Eventually, it is hoped that TransCanada’s Keystone XL pipeline project, held up by the Obama administration on environmental concerns, will get done and a link to it from the Bakken will be finished and help alleviate the current bottleneck.



TransCanada said in a press release in May that it “expects to begin construction of Keystone XL in the first quarter of 2013, with completion slated for late 2014 or early 2015.”

That would ease some of the pressure on rail traffic, but for now, though, rail still rules. In June, about 325,000 barrels a day were shipped out by rail, more than double the rate from at the end of the year.

BNSF has said that, eventually, it expects to have the capacity to ship as much as 730,000 barrels of crude daily out of North Dakota.

But that’s not enough for the oil companies, which are going into the transportation business on their own. Last week, the international oil giant Statoil ASA of Norway, now a major player in the region after paying $4.4 billion for the U.S. exploration and production firm Brigham Exploration last year, said it plans to lease 1,000 rail cars to ship its oil.

And, previously, refining firms, including Tesoro, Marathon, and Phillips 66, have been either buying tank cars or leasing tank cars and in some cases dedicated "unit trains," including engines and tank cars, to move oil to their refineries.

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