Union Pacific sees rail oil shipments quadrupling

Fri Jul 22, 2011 3:13pm EDT

* Union Pacific sees 2011 petroleum shipments quadrupled

* Railroad sees continued rail opportunity for oil

NEW YORK, July 22 (Reuters) - Union Pacific Corp (UNP.N), the largest publicly held U.S. railroad, said it it expects to quadruple the amount of oil it carries this year from the Bakken shale formation in North Dakota to U.S. Gulf Coast refineries.

"We'll probably quadruple the amount this year in terms of moving from the Bakken down to the St. James and elsewhere. We're seeing just a lot of interest overall," said Jack Koraleski, executive fice president of marketing and sales.

He said the company moved about 4,400 carloads of crude oil out of Bakken Shale in 2010.

"We expect to move a little more than 16,000 carloads in 2011." he said, adding the railroad moved a total of 8.8 million carloads in 2010.

By rail, oil generally travels in batches of 60,000 barrels or more on unit trains of 100 cars.

Prices of U.S. benchmark crude oil West Texas Intermediate Clc1 touched record lows against other crudes as supplies from Canada and the Bakken back up in the oil hub of Cushing, Oklahoma due to lack of pipeline capacity to carry it to the U.S. Gulf Coast for processing into gasoline and diesel.

The difference in price between WTI and global benchmark North Sea Brent LCOc1 grew to over $23 a barrel earlier this spring, and refiners scrambled for ways to take advantage of the cheaper WTI price, turning to rail, barges and trucks to carry oil.

"We're focusing exclusively on our own rail infrastructure to support it, and everything that we see, even as pipelines develop, tells us there's going to be a continued opportunity for rail in this marketplace going forward for a long time," he said.

Earlier on Friday, the U.S. State Department said it expects to issue a final environmental assessment on a key pipeline - TransCanada Corp's (TRP.TO) proposed pipeline $7 billion pipeline - that would alleviate the backup of inventories of crude in Cushing. [ID:nN1E76L0QK]

Koraleski said that with additional capacity coming on stream from the Bakken and other plays like the Eagle Ford shale oil in southern Texas, Union Pacific is looking to develop additional capacity.

"One of the unique things that rail gives to customers is the opportunity to go to various places and to play to the extent they can the market advantages for themselves, so we see a lot of interest in that," he said.

(Reporting by Janet McGurty and Lynn Adler; Editing by David Gregorio)

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