* Chairman, CEO Garland discloses plan at conference
* Booming shale oil production is overwhelming pipelines
* Companies are turning to trucks, rail and barges
HOUSTON, June 8 Phillips 66 plans to buy
as many as 2,000 railroad tank cars to ship oil from shale
fields to refineries, yet another sign that the shale boom is
reshaping the U.S. energy industry.
Phillips Chairman and CEO Greg Garland discussed the plan,
targeted for "the next year or two," at the Citi Global Energy
Conference this week, according to a transcript of his
Oil companies in fast-growing U.S. shale fields such as the
Bakken, Eagle Ford, Niobrara and Permian have turned to rail,
trucks and barges to haul crude because pipeline development has
not kept up.
"We're going to add rail capacity," Garland said. "We're
considering buying a couple thousand more railcars so we can get
Bakken crude either east and west."
Phillips 66, the newly spun-off downstream arm of
ConocoPhillips, has refineries on the East, West and
Gulf Coasts, and Garland said the company currently refines
about 100,000 barrels per day of shale oil but could handle
The initial goal is to increase delivery of shale crudes to
Phillips refineries by 100,000 to 150,000 bpd within two years
using railroad unit trains, he said.
"That's a pipeline on wheels. So, that could go to the
Bakken. It could go to the Niobrara. It can shift as the
opportunity shifts around the country," he said.
Techniques including hydraulic fracturing, or fracking, have
given drillers access to vast new deposits of so-called
unconventional oil in shale rock formations, helping to reverse
a decades-old decline in U.S. crude output.
Many analysts say rail will be a bigger part of the oil
delivery picture for years because shale wells - often
scattered, small and of uncertain lifespan - won't justify
"We think the E&P (exploration and production) side will
develop faster than infrastructure to take it away over the next
five to 10 years, so we think that will be a good investment,"
Garland said. "It's a really quick payback on that."
Garland said the typical unit train would be 100 cars
carrying 32,000 gallons (750 barrels) of crude. Using those
estimates, 2,000 tankcars would equal about 150,000 barrels.