Feb 4 Up to a dozen railroad terminals to load,
unload and store oil are sprouting up around the United States
as oil shippers turn to railroads to deliver barrels into
markets where crude is priced higher.
Growing Canadian and North Dakota oil supplies are heading
to Cushing, Oklahoma, in pipelines that can't deliver them
further south. Flexible rail routes could allow oil cargoes to
move to destinations where oil fetches a premium, and avoid a
38 million barrel glut of oil sitting at Cushing.
For an analysis, click here: [ID:nN04174206]
Construction of dedicated railroad terminals to handle
crude is happening quickly, as Cushing-delivered WTI trades at
an $11-a-barrel discount to Europe's Brent.
An even larger price spread has opened between North
Dakota Bakken shale crude -- worth $81 at the wellhead -- and
similar Light Louisiana Sweet LLS-, worth $104 a barrel on
the Gulf Coast this week.
The rail terminals are mostly built to handle oil sent
along rail networks run by giant U.S. rail railroads, such as
Union Pacific (UNP.N) and BNSF, a railway bought in 2009 for
$34 billion by Warren Buffett's Berkshire Hathaway (BRKa.N)
Shippers who can move barrels from North Dakota to
Louisiana by rail -- a journey that costs as little as $7 a
barrel -- stand to capture a big arbitrage premium.
Following is a factbox on existing and planned
crude-by-rail terminals in the United States:
* U.S. Development Group, already the largest operator of
railroad terminals for ethanol, opened a 60,000 barrel-per-day
(bpd) crude-by-rail unit train terminal in St. James,
Louisiana, this summer. Executive Bill Swann said the terminal
is receiving crude from Bakken at full capacity, and will
expand to take 120,000 bpd by the end of 2011.
* U.S. Development is also planning to build at least two
more crude-by-rail terminals in the near future, and possibly
more, Swann said. One of them will likely be located in Texas,
he said. The company is looking to build a southern rail
terminal specifically designed to handle incoming shipments of
heavy crude from Canada, Swann added.
* Industry sources and government officials in North Dakota
and Montana say that as many as 10 crude-by-rail terminals are
planned in the Bakken area, adding to existing crude-by-rail
capacity from the region of about 115,000 bpd.
* EOG Resources (EOG.N) began early this year to ship crude
between its two new crude-by-rail terminals in Bakken and
Stroud, Oklahoma, near Cushing. The company has said the
terminals will allow it to ship a unit train per day, or 60,000
barrels. The terminals segue into BNSF's railroad network.
* Canadian National Railway (CNR.TO) has touted its ability
to move large volumes of Canadian heavy crude as far south as
the U.S. Gulf Coast at prices that would be competitive with
pipeline rates. So far, the concept remains in trial stage. CN
has also said it could ship large volumes to Canada's West
Coast if it adds dedicated railcars to its fleet.
* Salt Lake City-based Savage Cos said in January it plans
to build a new Bakken crude-by-rail terminal in Trenton, North
Dakota, to begin operating by the end of 2011. [ID:nN25283957]
* Texas-based Rangeland LLS said in November it plans to
build a 60,000-bpd rail terminal and hub in Williams County
North Dakota to load crude from Bakken shale. With up to
210,000 barrels of tanking space and a 60,000-bpd railcar
loading facility, the terminal would send crude on BNSF's
railway and could begin operating at end-2011.
* New York-based oil distributor and producer Hess (HES.N)
is building a 130,000-bpd rail terminal in Bakken to be
completed during the first half of 2012.
* NuStar Energy (NS.N) began sending Bakken crude by rail
to its own rail terminal in St. James, Louisiana, earlier this
* Musket Corp is among the logistics companies already
sending crude by rail out of Bakken Shale to destinations
including St. James, Louisiana. The company has been shipping
15,000 bpd to the Gulf Coast by rail, said manager Dan House.
(Reporting by Joshua Schneyer; Editing by Lisa Shumaker)