Skip to comments.Phillips 66 moving Bakken oil by rail in $1B deal
Posted on 01/09/2013 8:51:51 AM PST by thackney
Phillips 66 has begun shipping crude by rail from North Dakota to a refinery in New Jersey in an effort estimated at more than $1 billion.
The company said this week it had signed a five-year deal with Global Partners to move oil produced in the Bakken shale play to its Bayway refinery.
The Bayway refinery, the largest on the east coast, is already receiving crude through the deal, which will move 91 million barrels of oil over the contract term, or about 50,000 barrels a day, Phillips 66 spokesman Dennis Nuss said. The refinery is expected to receive crude on a daily basis, except during maintenance or other interruptions in activity, Nuss said.
The oil will be moved by rail from North Dakota to a terminal in Albany, N.Y., where it will be loaded onto barges and shipped down the Hudson River to the Bayway refinery.
Phillips 66 did not reveal the price of the contract.
Based on the cost of shipping oil by rail at that distance and then moving it by barge, estimated at between $13 and $15 a barrel, the contract is likely worth between $1.1 billion and $1.5 billion, said Greg Haas, manager of research at Hart Energy in Houston.
The deal will leave Bayway in a strong position, with a steady stream of crude that is priced well below oil imported to east coast refineries from overseas, Haas said.
Bayway is going to have strong crude purchasing fundamentals because of this rail deal, in addition to the strong energy price fundamentals, Haas said.
Haas said Bakken crude was trading Tuesday at around $87 a barrel, which compares to close to $112 for Brent crude, which is used as a benchmark for world oil prices.
If Bakken oil continues to sell at a discount to Brent, the price difference will result in a savings for Phillips 66, even with a shipping fee of as much as $15 a barrel, Haas said.
This refinery has a pretty positive outlook in my opinion, he said.
The contract will use Global Partners network of loading facilities and offloading terminals, according to a Phillips 66 announcement.
Global has established a virtual pipeline for the reliable transportation of Bakken crude, said Tim Taylor, Phillips 66s executive vice president of commercial, marketing, transportation and business development. Our five-year agreement with Global assures us long-term access to advantaged crude for our Bayway refinery through what we believe is a cost competitive origin-to-destination supply system to the east coast.
Who is it again, who’s been investing in railroad companies? I think it’s some sort of Buffet or restaraunt company with deep pockets and political influence?
Well, that’s certainly much better than trying to move it through some stupid pipeline where it would get handled a lot less. Thankfully trains never derail whereas pipelines are rupturing almost hourly. Lucky there were no rail cars on the ferry that just crashed in NYC huh?
Who is it again, whos been investing in railroad companies? .................................Bingo! My thoughts exactly, one of the benefits of being an insider in Gov’t.. Follow the $$$ see who is cashing in on the deal. Someone is having their pockets lined for sure.
Maybe I should look for a bump in that PSX stock.
Interesting. There’s an extensive rail network in place around BayWay. It pretty packed in though with the storage tanks and residential area of Elizabeth though so perhaps there’s no room to make a depot to offload the oil from the rail cars directly.
Definitely good news for this area of New Jersey.
Come back home to the refinery
Hiring man said “son if it was up to me”
Warren Buffett owns his-self an entire railroad. His secretary also pays a higher tax rate than he does. Or at least until they fixed that with the fiscal cliffy thingie, taxing just those evil billionares!
Stupid pipelines make WAY too much economic sense for the Current Regime to seriously consider construction. The White Hut’s “business model” is to make commercial operations so expensive and uncompetitive as to drive out any other future investment from commercial sources.
Then, of course, they step in to provide “venture capital” as a prelude for an excuse to later nationalize that particular industry. Of course, you understand, only failing industries get that sort of “assistance”.
Oil pipelines are not sufficiently close to failing just yet.
100 rail tank cars every day ?
I wish Freepers would actually research the facts before mouthing off about topics they do not understand. Phillips 66’s deal involves a single-line movement by Canadian Pacific Railway from North Dakota to a barge dock in Albany, NY, then downriver to Bayway, New Jersey.
BNSF handles crude oil from North Dakota to eastern connections at Chicago (CSXT and Norfolk Southern) bound for northeastern refineries as well. I’m unaware of any pipelines being proposed from the Bakken region to the Northeast. Furthermore, Bakken production far exceeds any proposed future pipeline capacity to Texas, Oklahoma and Louisiana, so the rail option is needed regardless.
I’d bet on a 50-60 day round trip for the cars. To do 50,000 bbls/day requires loading 100 cars every day.
At some point, they will run out of rail cars because every tank car in the US will be “in service” or returning to reload.
“The oil will be moved by rail from North Dakota to a terminal in Albany, N.Y., where it will be loaded onto barges and shipped down the Hudson River to the Bayway refinery”
Most people ASSUME that the only railroad moving out of ND is the BNSF. This is not the first deal like this. JD Irving made a deal similar to this to bring Balkan oil to his refinery in St. John, New Brunswick on the Atlantic Ocean. I believe that also is being shipped across Canada on the CPRS.
What they really need is a canal from Buffalo to Albany that could handle barge traffic off the Great Lakes. (sarc)
Bakken Oil production has reached 682,393 BPD.
The completed Keystone XL by Transcanada would add 510,000 BPD.
Bakken Crude Express Pipeline by ONEOK Partners will add 200,000 BPD.
Steelman pipeline project by Enbridge will carry 145,000 BPD.
Other pipelines are in various planning stages as well.
They will make more rail cars.
Not this specific project but enlarging in ND:
BNSF increases Bakken oil-hauling capacity to 1 million barrels a day
The free market is so unfair.
The Keystone XL includes loading points for the Bakken area.
It certainly would move a lot of Alberta oil/bitumen, but it plans to move oil out of ND as well.
There are several other pipelines planned as well, not to mention the majority of the Bakken Crude moves out on existing pipelines already.
Good point though for the sake of fairness.
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