* Crude shipments fall nearly one-fourth compared with 4Q
* Decline stems from crude price decline, pipeline startups
By Kristen Hays
HOUSTON, Jan 23 Union Pacific Corp's
crude oil shipments via rail to the U.S. Gulf Coast were down 22
percent in the fourth quarter from a year earlier as pipeline
startups increased supply in the region, a senior executive told
analysts on Thursday.
Narrowed discounts of U.S. crude prices to London's Brent
also played a role in the decrease, Eric Butler, executive vice
president of marketing and sales for the railroad, said during
the company's fourth-quarter earnings call.
"Crude oil spreads, growing crude supply and increased
pipeline activity are expected to have a continued impact on our
crude by rail volumes," he said.
The largest publicly traded U.S. railroad network reported a
20 percent increase in quarterly profits on Thursday on higher
demand for agricultural goods, autos and other industrial
Crude oil shipments make up about 2 percent to 3 percent of
the company's total volumes, according to Beth Whited, vice
president and general manager of chemicals for Union Pacific,
who spoke at an energy conference in Houston this week.
Butler said pipeline startups through 2013 increased flows
of West Texas and Oklahoma crude output to the Gulf Coast,
reducing the need to move it via rail.
In addition, the spread of Gulf Coast crude benchmark Light
Louisiana Sweet (LLS), which had traded at a $1-per-barrel
premium to Brent in the first three quarters of last
year, fell sharply to a discount in the fourth quarter. Cheaper
crude already in the region prompted a decline in rail shipments
of North Dakota Bakken crude, he said.
Just Wednesday, TransCanada Corp started commercial
service for its long-awaited 700,000 barrel-per-day Gulf Coast
pipeline, linking the bloated U.S. crude futures hub at Cushing,
Oklahoma, to Texas Gulf Coast refineries. That new influx of
crude could further pressure crude prices down in the Gulf Coast
Union Pacific's network connects 23 states in the western
two-thirds of the nation by rail. In addition to moving crude
from North Dakota and Texas, the company's network serves oil
plays in Colorado, Wyoming and Utah.
Butler said Union Pacific's strategy to growing
crude-by-rail volumes will focus on strengthening the sites
where shipments are loaded and then unloaded, recognizing that
volumes can change as crude prices fluctuate.
"The various destination regions really are fundamentally
going to be driven by the market and spreads," Butler said.