By Kristen Hays
HOUSTON Feb 21 PBF Energy Inc expects
crude by rail to be a "very, very long-term trend," particularly
the movement of Canadian heavy crude, Chairman Tom O'Malley told
analysts on Thursday.
"That is something that is around for the next decade,"
The company, which runs three U.S. refineries - two on the
East Coast and one in Ohio - is also positioning itself to
discharge crude and condensate produced in Ohio's Utica shale
oil play via rail and truck when the output becomes available,
said PBF Chief Executive Tom Nimbley.
Some analysts have questioned the growing investments in
crude by rail, as numerous pipeline projects seek to move inland
U.S. and Canadian crude production to refining markets.
But PBF sees crude by rail as key to transforming its East
Coast refineries from money losers to profit makers. Several
East Coast refineries have shut down because reliance on
expensive imports left them unprofitable as players with easier
access to cheaper inland U.S. and Canadian crudes fared much
Earlier this month, the company announced it had finished
its second crude unloading facility at its 182,200
barrels-per-day (bpd) refinery in Delaware City, Delaware.
The facility can discharge up to 70,000 bpd of light sweet
crude oil from North Dakota's Bakken shale and 40,000 bpd of
Canadian heavy crude.
On Thursday the company said its directors had approved a
$50 million project to expand that facility to double heavy
crude unloading capability to 80,000 bpd so the refinery can
receive up to 150,000 bpd of crude via rail.
The expansion is expected to be finished in the fourth
quarter this year, but O'Malley said availability of rail cars
able to handle heavy crude "really puts off that 80,000 barrels
a day number until the start of 2014."
Rail cars that transport Canadian heavy crude need
insulation and coils suited to heat viscous Canadian heavy crude
so it will flow.
"We are making investments and signing agreements in Canada
to source that crude as we speak," O'Malley said.
The company began ramping up runs of cheaper crude received
by rail in 2012, and O'Malley said the financial benefits will
grow this year as those runs increase.
The company's net income for the fourth quarter was $165.7
million, or $1.70 per share, compared to a loss of $111.7
million, or $1.15 per share, in the last three months of 2011.
Nimbley said the East Coast refineries' profits are expected
to grow both from improved coking economics and more deliveries
of cheaper crude, further decreasing dependence on pricey
"We believe that our East Coast system has turned a corner,"
He said PBF intends to run all heavy crude brought in by
rail at the Delaware refinery and split the Bakken barrels
between it and the 160,000 bpd Paulsboro, New Jersey, plant.
The company 's 160,000 bpd Toledo, Ohio, refinery also has
increased runs of cheaper inland U.S. crude. Nimbley said PBF
has ramped up its crude oil truck-unloading rack at the plant
and took more than 10,000 bpd of "locally sourced" crudes there
Nimbley said PBF also is "carefully monitoring" crude
development in Ohio's Utica shale play and "positioning
ourselves to be able to discharge crude and condensates from
this region by rail or truck when they become available."
Executives also said on Thursday that a coker and a
hydrocracker at the Delaware refinery and a "big unit" which
they did not identify at the New Jersey refinery would undergo
planned work in the fourth quarter this year.