UPDATE 1-Tesoro triples crude-by-rail to northern California

Thu Nov 7, 2013 10:58am EST

Related Topics

* Tesoro's Martinez refinery running 350,000 barrels per month of Bakken crude

* Washington port rail-to-barge project in permitting phase

By Kristen Hays

HOUSTON, Nov 7 (Reuters) - Independent U.S. refiner Tesoro Corp has tripled the amount of North Dakota Bakken oil delivered by crude-only trains to its northern California refinery since the first such shipment in September, Chief Executive Greg Goff said on Thursday.

He said the 166,000 barrels-per-day (bpd) Golden Eagle refinery in Martinez is running about 350,000 barrels per month from three so-called "unit trains" that carry only crude. The first unit train arrived in September.

"It really just started and is just ramping up," Goff said during Tesoro's third-quarter earnings conference call.

However, he said the third-party offloading facility handling the incoming trains is "pretty much maxed out," so deliveries cannot ramp up further until Tesoro's joint-venture $100 million rail-to-barge oil terminal starts up at a port in Washington.

Both initiatives are part of Tesoro's overall plan to run more inland U.S. and Canadian heavy crudes, which are cheaper than imports, at its West Coast refineries. Rail is a critical factor in getting those crudes to the West Coast, as no major pipelines move crude to that market.

Tesoro already runs 50,000 bpd of Bakken crude at its 120,000 bpd refinery in Anacortes, Washington, where the company started up a crude offloading facility more than a year ago. Phillips 66 and BP Plc also have rail offloading projects in the works to do the same.

PERMITS SOUGHT

Goff said Tesoro and Savage Services, its partner in the Port of Vancouver project in Washington, submitted applications for environmental permits in August and the company expects that approval process to take about a year.

"We continue to expect that facility to be up and operational sometime late next year or early in 2015," Goff said.

The 280,000 bpd rail-to-barge project is intended to help supply cheaper U.S. and Canadian crude to other West Coast refiners as well as Tesoro's own plants. Tesoro owns four West Coast refineries and controls nearly one-fourth of the crude oil refining capacity on the West Coast.

Tesoro has committed to the first 60,000 bpd of throughput to the port project. It initially would start up with a 120,000 bpd capacity, but Goff said the permits will seek the full capacity of 280,000 bpd.

He said Tesoro hasn't yet begun marketing that capacity to other refiners.

"There's not a lot of work to do to get up to the 280,000 barrels a day, so we'll see what the market demand is and make that decision accordingly," Goff said.

Tim Taylor, executive vice president for commercial, marketing, transportation and business development for Phillips 66, told Reuters last week that the company sees the Tesoro-Savage project as a third party option to tap more North American crude in addition to its own efforts. Phillips 66 has two refineries in California and one in Washington.

"We're looking at all those options. It's really about the value they can drive," Taylor said last week.

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