Oil prices fall as concerns over global fuel glut re-emerge
* Crude weighed down by surge in US stocks, rising Nigeria exports
(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, July 10 Notwithstanding the appalling train disaster in Quebec this month, U.S. government accident data show both railroads and pipelines are relatively safe ways to move crude oil and other hazardous liquids over long distances.
The Canadian derailment and subsequent explosion, which killed at least 15 people and left dozens more unaccounted for, has sparked a renewed debate about whether it is safer to move crude and other hazardous liquids by tank car or pipeline.
Back in May, Canada's Prime Minister Stephen Harper warned that rejection of the proposed Keystone XL Pipeline would lead to an increase in oil shipments by rail, which he called "more environmentally challenging" than pipelines.
Keystone supporters are poised to cite the derailment as evidence that pipelines are safer. But the rail industry has already begun to push back. "Rail has fewer spills that release less crude oil than other transportation modes," according to the Association of American Railroads (AAR).
The association has published a battery of statistics to show pipelines have more and bigger spills than rail operators. It estimates railroads spill just 0.38 gallons for every million barrel-miles of crude moved, compared with an estimated spill rate of 0.88 gallons on the pipeline network.
A barrel-mile is measure of through-put that signifies one barrel moved one mile.
So who is right? Is it safer to ship crude by pipeline rather than tank car? The answer: it depends.
Table 1: link.reuters.com/gum59t
Table 2: link.reuters.com/jum59t
AMOUNT SPILLED IS SMALL
The first and most important point is that the amount of crude and other dangerous liquids spilled on both the railroads and the pipeline network is small when compared with the enormous volume of crude and other flammable, explosive and toxic liquids they carry every year.
In the United States, there are over 182,000 miles of pipelines carrying hazardous liquids, according to the Pipeline and Hazardous Materials Safety Administration (PHMSA), which regulates both the pipelines and dangerous materials carried on any other mode of transport such road, rail, air and sea.
In 2011, the total volume of hazardous liquids transported on the pipeline network hit a record 5,888 billion barrel miles.
Crude accounted for accounted for around 30 percent of the volume transported (1,813 billion barrel-miles).
But hazardous pipelines also carried refined products (1,602 billion barrel-miles), highly volatile liquids like propane (539 billion barrel-miles), and carbon dioxide (1,932 billion barrel-miles) which is toxic in high concentrations.
Over the last decade, U.S. hazardous liquid pipelines have spilled fewer than 30 barrels of crude and other hazardous liquids for every billion barrel-miles transported.
The number of fatalities as a result of serious and significant incidents has averaged fewer than two a year (with five more injuries). Damage to property has averaged $218 million (Table 1).
The government does not publish directly comparable statistics on the volume of crude and other hazardous liquids carried on U.S. freight trains, so it is difficult to provide precise comparisons for the railways. Most estimates are based on a confidential sample of waybills (transit records) obtained from the Surface Transportation Board, which regulates freight rates in the rail industry.
Historically, the volume of hazardous liquids moved by train has been 1-2 orders of magnitude smaller than by pipeline. But the AAR statistics, which are based on its own proprietary data and waybill-derived volume estimates, suggest the spill rate is very similar to the pipelines, and the industry operates very safely in general.
PIPELINES MUST SHUT PROMPTLY
Which method of transport is "safer" depends on whether the object is to minimise the number of spills (in which case pipelines have the advantage) or their size when they do occur (in which case rail freight is better).
Pipelines are very safe but they move enormous volumes of crude oil and other liquids under considerable pressure, so if there is a serious rupture the potential volume of liquid released is much higher.
Beginning in 1971, the U.S. National Transportation Safety Board (NTSB) has published a series of reports which emphasise that if pipelines are to operate safely, they must shut down quickly following any incident to minimise the amount of liquid released into the environment.
All pipelines therefore contain a series of manually operated or automated valves along their length so affected sections can be isolated quickly.
They are equipped with monitoring equipment and alarms to check pressure remains constant and that the volume of material entering each segment matches the volume of liquid coming out, to confirm the line is not leaking.
Once the alarms go off, control room staff are under orders to shut down the line quickly, generally within 10 minutes, unless they can resolve the problem and confirm the line is operating safely. If enough alarms sound or a major one is triggered, the line must be shut immediately until a visual inspection confirms that it is safe to resume operations.
Pipeline operators are required to identify line sections that pass through high consequence areas (HCAs), those with substantial populations or environmentally sensitive habitats and watercourses, and take special measures to reinforce them and monitor for potential integrity problems.
Provided the 10-minute rule is adhered to and the line is shut promptly, spillages should be kept to no more than a few hundred or thousand barrels at most. Larger spillages have normally occurred when control room staff have ignored alarms, valves have not closed and pumping has not ceased immediately.
By contrast, the amount of crude and other hazardous liquids that can be spilled from a freight train is much smaller because the maximum volume that can be carried in a single tank car and on the train as a whole is much smaller.
COMPARISON OF ACCIDENT STATISTICS
Between 2002 and 2009, there were just over 3,000 instances in which hazardous liquids were spilled from pipelines, compared with almost 5,000 escapes from rail tank cars, according to the PHMSA's incident recording database.
These numbers include all hazardous liquids, not just crude oil and refined products. But since any escape is a potential threat to human health and the environment it is reasonable to look at the totals rather than just crude oil, and it is more meaningful because until very recently the railroads carried so little crude.
The average escape from a pipeline was 260 barrels, compared with just 17 barrels from a container on the rail system.
The pipeline average is biased upwards by a small number of very large spills. Two-thirds of pipeline spills released less than 10 barrels. But more than 30 percent of all the liquid spilled was released in just 10 large incidents where over 10,000 barrels were spilled each time.
In the worst case, 49,000 barrels of crude oil were spilled from an above-ground storage tank which had corroded at Cushing in Oklahoma in 2006, though almost all of it was subsequently recovered.
But the typical pipeline spill is very small. The median amount of hazardous liquid spilled from a line is just 3 barrels, which is not much different from the median 1 barrel spilled on the railroads (Table 2).
On balance, both pipelines and trains have a good safety record transporting crude and other hazardous liquids in North America.
Adjusted for the much larger amount of hazardous liquids that they carry, pipelines spill less, though the difference is not huge. But crucially, pipelines must shut very promptly in the event of an accident to avoid a catastrophic release of material.
Safety culture is critical. Following a series of large pipeline spills in the last four decades, and repeated pressure from the NTSB and now the PHMSA, most pipeline operators seem to have improved their safety culture. Control rooms are instructed to shut down first and ask questions later if there is hint of even a small leak.
But as events in Quebec have shown, every spill has the potential to inflict catastrophic harm, so maintaining a strong safety culture that puts safety ahead of all other considerations is essential. (Editing by Pravin Char)
* Crude weighed down by surge in US stocks, rising Nigeria exports
Oct 25 Canadian National Railway Co reported a 6.5 percent fall in quarterly revenue on Tuesday as it moved lower volumes of crude oil, coal and fracking sand.
Oct 25 Contract oil and gas driller Nabors Industries Ltd said on Tuesday it was seeing significant utilization increases in the Lower 48 states of the United States, but that spot market pricing remained competitive.