NEW YORK, March 20 Phillips 66 will ship
up to 40,000 barrels per day of crude by rail from pipeline
operator Enbridge Energy Partners' unit train terminal
in North Dakota in one of several deals the large oil refiner
announced on Wednesday.
The agreements will allow Phillips to ship more of what it
called "cost advantaged" North American crude to its refineries
around the United States in the coming years. This could help it
secure cheaper supplies of oil and boost its refinery margins.
The crude-by-rail shipments from an Enbridge terminal in
Berthold, North Dakota, will begin as early as May and ramp up
to between 35,000 and 40,000 barrels per day by November,
Phillips has a stake in 15 refineries with a net crude oil
processing capacity of 2.2 million barrels per day.
Crude from the Bakken field of North Dakota will be sent to
Phillips' refineries on both the East and West coasts and
potentially also to the southern Gulf Coast, the company said.
Crude-by-rail has emerged as a viable alternative to
pipelines for getting growing production volumes out of the
Bakken field to refineries in other regions, which have often
had to rely on more expensive imports.
Bakken crude and other oil produced in landlocked U.S. shale
regions and in Canada have been trading at substantial discounts
to barrels delivered in coastal regions, including imported
crudes. That provides financial incentives for oil and railroad
companies to move inland crude to coastal regions, where it
fetches a price premium.
In another agreement, Targa Resources Partners will
unload crude shipped by rail from Canada in Washington State and
barge it to a Phillips refinery in Ferndale, Washington. The
deal will help Phillips run more Canadian oil supplies, which
Houston-based Phillips also announced a deal with Magellan
Midstream Partners to use the company's pipelines to
transport crude near its refinery in Ponca City, Oklahoma.
The companies plan to substitute West Texas Intermediate,
the benchmark grade for U.S. crude futures, with a new
crude stream from the nearby Mississippian Lime shale play,
Phillips said. Shipments should begin in late 2013 and ramp up
to 20,000 barrels per day in early 2014, the company said.
Phillips also said it would invest in its own crude
transportation assets in Oklahoma, allowing it to ship an
additional 40,000 bpd of crude from the Mississippian Lime to
its Ponca City plant.
The plans are part of a strategy in which Phillips is
"aggressively pursuing increased access to advantaged crudes in
North America," Chief Executive Officer Greg Garland said in a