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 66’s 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.”
No sorry. I wasn’t trying to imply it was going East.
I was just trying to put in perspective the volume the Keystone XL would carry and the difficulty of picking up that volume with rail.
Rail will help and rail will and should be used. But it really is a supplement to the huge volumes carried on major pipelines; it is not a reasonable replacement for major pipelines.
What is the API gravity of the Keystone crude ?
The pipeline would move crude oil and dilbit from multiple fields with varying API. It would pick up Alberta oil sands and Bakken along with some others.
The majority would be diluted bitumen or upgraded bitumen (syncrude)
This represents a single line haul on a very direct 286,000 lb. capacity route - no interchanges, no classification yards. It mimics ethanol moves which have been on-going for several years.
The Albany terminal is immediately adjacent to the Canadian Pacific Kenwood Yard; track and storage capacity are virtually unlimited and the unloading facilities are in place.
You could expect the dedication of 29,000 gallon cars to this move, so allowing for a 14 day turn would require, what, maybe 1,000 cars?
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Just a bit over 1,000 cars. I don't know what they would allow contingency, maintenance, etc. Probably not much, 2~4%???
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I don't claim any knowledge on the rail shipping times. I have no experience to judge that. I was commenting on what the suggested shipping times equated to implementation.
Others have mentioned limitations of unloading capabilities. I have not done rail but I have done tanker truck operations. The equipment, load arms, metering, etc that was typically used maxed out at ~750 gpm with nearly half that being normal.
If a 29,000 Gal tank is unloaded at 600 gpm, it takes 50~55 minutes per tank to connect, unload and disconnect. Multiple unloading stations are typical in a rail operation, I've seen 5~6 before at refineries. It would take about 3 stations at an hour average to empty 50,000 bpd. So even if the facilities don't exist today (with capacity to handle this new traffic) it is not a big project to add that capability.
I don't mean to suggest this is a bad idea. It is not. It is delivering domestic crude to a crowded area that would be difficult to construct new pipelines. It isn't as cheap or a simple as a “typical” pipeline. But building a new pipeline from Illinois (where several pipelines bring oil) to Linden, NJ is not typical, easy or cheap.
The 52’ SeaRay may be to high off the waterline to make it under many of the bridges across NY state. The barge canal(formerly Erie Canal) was constructed to haul small barges with a 15’ beam or less using horses to pull them along the length of the canal.
However, I am sure there are many canal boats that could be rented with captains. Also, there are sections that connect the Finger Lakes south of Rochester and west of Syracuse where you would have access to Seneca and Cayuga Lakes where a 52’ SeaRay would be just the ticket.
They may have a facility that could handle 100 cars, but it is had to believe they would have a siding with that much length to accomidate 100 cars at a time. It would need to be over a mile long(70’ x 100 cars = 7000 feet).
I am only speaking from my experience as a lumber broker that very few yards can handle a spot of more than 25 cars at a time. That is a lot of real estate.
Thanks for the info.
There is an existing multi-lane siding ~6,000 feet at a “small” tank farm on the south side of Albany, NY.
I doubt they are common, but they do exist.
http://maps.google.com/?ll=42.62781,-73.76509&spn=0.025955,0.042572&t=h&z=15
I wish them well but I think there is no way 10 days’ worth of cars will cover this move. 3,000 cars at min...
I’ve read about the Erie Canal and would love to take it down into New York.
I dunno much about tank cars and even less about crude oil, but the discharge rate for a 3,500 bushel grain hopper (100 tons) at a major terminal is about 12 per hour, or 100 in an 8 hour shift. I would suspect that maybe January in Albany creates issues for crude oil that we don’t see much of at grain terminals in New Orleans.
I grew up in western NY, just south of Buffalo and went to college in central, NY @ Morrisville and Syracuse. There is a lot of pretty country in upstate NY once you get outside of the old rust belt cities.
It is like a whole different country north of Westchester County/NYC. The Adirondack Park is one of the largest forever wild areas in the US.
I’d visit Buffalo two or three times a year when I was serving the steamship fleets. American Steamship Co. was based there until recently.
Back in 85 I worked for the summer in a warehouse building down on the Buffalo River. I worked for a developer that had made all his money in garbage. He owned a land fill. He had recently sold his garbarge business to BFI for millions. I think he was a mobster too. He would buy old buildings rehab them and turn them into commercial buildings and rental apts. I worked that summer turning a old victorian house into an expensive mens clothing store with an apt on the third floor. We were refinishing all the old woodwork in the house.
The General Mills Cheerios plant was right next door. There were the big abandoned grain elevators all along that river. It was a pretty rough part of town. The street out front was infamous for night time drag races. At night the rats would come out too. They ate the burnt cheerios that got converor belted out of the factory. They were the biggest rats I have ever seen. Very well fed.
It made me not want to eat Cheerios for many years. A buddie of mine that lived on a farm used to go there once a week and fill up the back of his pick up truck with burnt cheerios. He fed them to his pigs and chickens. They were free.
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