(Adds option of Canadian crude by rail, background on Bayway)
By Sabina Zawadzki
LINDEN, N.J. May 23 Phillips 66 said on
Thursday it would use more domestic shale oil at its New Jersey
Bayway refinery and could consider exporting gasoline from the
facility thanks to lower costs and as U.S. fuel demand wanes.
The 238,000 barrel-per-day (bpd) Bayway refinery is one of
several on the East Coast emerging from years of poor margins as
they have depended on higher-priced oil from Europe and Africa
due to a lack of access to cheaper domestic crude.
The shale oil revolution from the Bakken formation in North
Dakota is changing that as East Coast refineries work out the
logistics of bringing in that crude by rail. That would further
reduce costs at refineries, which currently benefit from low
Bayway already receives Bakken crude, transported by rail to
Albany in New York State and then by barge to the refinery,
which is located by a narrow body of water between Staten Island
and New Jersey.
"There's 80,000 to 90,000 barrels coming by rail from North
Dakota versus zero a year ago. It processes well," Bayway
refinery manager David Erfert told journalists on refinery tour
on Thursday. He later said Bayway at times received 70,000 bpd.
Philips 66 is in the process of building an offloading
facility that will allow it to receive additional Bakken crude
directly to the refinery.
The facility is built to accommodate a unit train of 100
rail cars per day. With each rail car able to hold 750 barrels,
the capacity would be 75,000 bpd, Erfert said, adding that
Bayway could also take Canadian crude by rail too.
"We're considering it. With a rail rack on site, that opens
a lot of optionality," he said.
Phillips said the offloading facility's capacity does not
translate into actual 'crude by rail' volumes and declined to
give the overall expected volume.
In January, the company said it had entered a five-year
commitment to ship Bakken crude by rail to Bayway using Global
Partner LP's loading facilities and terminals.
And in March, it said it had agreed to ship up to 40,000 bpd
from pipeline operator Enbridge Energy Partners' train
terminal in North Dakota, although this crude would go to both
its West Coast and East Coast refineries.
The boom in domestic shale oil production, from Bakken and
from the Eagleford formation in Texas, coupled with steadily
falling gasoline demand, helped turn the United States into a
net exporter of refined products in 2011 for the first time in
over 60 years.
The East Coast however is still a net importer due to the
sheer size of the market in the country's most populated region.
But falling demand, cheaper refining costs and struggling
European refineries could change that, Erfert said.
"We're looking, in several years' time, into installing
facilities to do that (export)," Erfert said. "We can already
export diesel and we do occasionally. Additional piping would be
needed to export gasoline."
(Reporting by Sabina Zawadzki; Editing by Chris Reese and Bob