September 11, 2013 / 2:01 PM / 5 years ago

UPDATE 1-Tesoro delivering first Bakken crude unit train to California

* Co’s N. Calif. refinery increasing crude by rail shipments

* Tesoro Washington state rail-to-barge project on track

* Utah refinery expansion on target to wrap up in late 2014

By Kristen Hays and Erwin Seba

HOUSTON, Sept 11 (Reuters) - Independent refiner Tesoro Corp was delivering the first unit train of North Dakota Bakken crude to its northern California refinery on Wednesday, Chief Executive Officer Greg Goff told analysts at an energy conference.

Goff said at the Barclays Energy-Power Conference in New York that the delivery was part of Tesoro’s efforts to increase processing of cheaper inland U.S. crude in place of more expensive imports and Alaskan crudes.

The 166,000 barrel-per-day (bpd) Golden Eagle refinery in Martinez, California, had been receiving about 5,000 bpd of Bakken crude on mixed-freight trains. Goff said Wednesday’s delivery would be the first so-called unit train, or one that carries only crude oil.

West Coast refiners, isolated from other markets by the Rocky Mountains and a lack of pipelines moving crude west, are increasingly turning to rail to access cheaper crudes more readily available to peers in other markets.

A year ago, Tesoro started up a 50,000 bpd crude offloading system at its 120,000 bpd Anacortes, Washington, refinery. Other refiners in the state, including BP Plc and Phillips 66 , are building infrastructure to do the same.

Tesoro also aims to build a joint-venture $100 million rail-to-barge oil terminal at the Port of Vancouver in Washington state that will receive North American crudes by rail and then move waterborne shipments to California and Alaska. The facility is on track to have new tanks built by the end of 2014, Goff said on Wednesday.

Goff said Canadian heavy crude, even cheaper than U.S. crudes, can reach the port two ways: via rail directly from Canada, or from Canada to Wyoming by pipeline and then via rail to Vancouver.

The port project “has opened up a significant opportunity to change the crude dynamics on the West Coast,” Goff said.

Regarding its refineries, Goff said Tesoro was on schedule to finish by the end of 2014 the second phase of a $275 million project to expand the crude slate that its 58,000 bpd Salt Lake City refinery can process.

Once completed, the refinery will be able process up to 22,000 bpd of cheaper waxy crude oil produced in Utah, and the plant’s total throughput capacity will rise by 4,000 bpd. The project is expected to add $100 million to Tesoro’s bottom line, Goff said.

He also said Tesoro is in the final stages of selling its 94,000 bpd Kapolei, Hawaii, refinery to Par Petroleum Corp in a $300 million deal that includes retail stations, a logistics network and oil inventory.

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