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Linn Energy, LLC (LINE) Message Board

  • rlp2451 rlp2451 Feb 7, 2013 9:32 PM Flag

    More Bakken Oil to be Moved By Rail

    Oil Shipments by Rail Were up Huge in 2012

    February 7, 2013

    If you're paying much attention to the energy industry you're likely well aware that we're producing more oil than we have in years. You also are probably well versed in the fact that we're actually producing more than our current pipeline and refining infrastructure can handle. That's caused quite a disconnection between the price of domestically produced oil and the globally priced benchmark of Brent crude oil.

    Of course, producers and their customers are not taking this lying down. We know they've been increasingly turning to shipping crude by rail. With the release of a new report from the U.S. Energy Information Administration we now know just how big an effect that's had on the railroad industry.

    According to the report, crude oil and petroleum product shipments were up 46.3% over 2011, or by 171,000 carloads, to 540,563 in total. That's the largest percentage increase of shipments among all commodities. Despite this, coal still remained tops in total shipments at 41% of all commodity shipments, however, coal shipments did drop 11% from 2011. With that as a backdrop, who's profiting from this growth?

    The rails
    Of course it goes without saying that the railroads are benefiting from the rise of oil transports. Topping the list is Warren Buffett's Berkshire Hathaway. The company's subsidiary Burlington Northern Santa Fe is the largest operator of rail lines in the North Dakota region where the Bakken is in play. The company plans to be shipping 700,000 barrels a day by the end of the year.

    While Buffett has the Bakken under wraps, a similar bottleneck in pipeline takeaway capacity has hit crude prices from the Canadian oil sands, which also has Buffett smiling. Canadian National Railway has seen its share of crude coming along for a ride. The company sees its own crude oil shipping business doubling this year to 60,000 carloads, and its building a new terminal in the Gulf region to serve the Gulf Coast refining market.

    The refiners
    Speaking of that refining market, those refiners are chomping at the bit to get their hands on this cheaper crude oil. Take Phillips 66 the company just signed a five-year deal to have Bakken crude oil shipped to one of its refineries in New Jersey. Here's the kicker: That deal adds between $10 and $15 per barrel in transportation costs.

    That might sound like a lot, unless of course you consider that the spread between Brent crude and West Texas Intermediate is near $20 a barrel, with Bakken crude fetching a deeper discount. This is giving refiners important access to crude oil that's simply not possible to access given the current pipeline infrastructure. This increased access is juicing margins and increasing the flow of profits. It is making both winners and losers out of companies operating in the midstream space.

    The mixed bag for midstream operators
    Despite the lack of pipeline takeaway capacity, the success of crude by rail as well as oil glut at Cushing has been having a significant impact on pipeline operators. Enbridge's pipeline system coming out of the Bakken has been underutilized for the past three months. This has caused ONEOK Partners to put the brakes on its plans to build the Bakken Crude Express after it did not receive sufficient commitments from shippers to proceed. It's estimated that 52% of crude out of the Bakken is moved by rail, and pipeline operators pick up just 38% of shipments.

    Of course not all midstream operators are being squeezed. Plains All American Pipelines has been bulking up its rail business, and late last year it completed the acquisition of several additional crude oil rail terminals. The company now possesses loading terminals in the Bakken, and also unloading terminals on both coasts as well as in the Gulf. Few midstream operators are better positioned to benefit from the rise of crude oil transportation by rail than Plains.

    Despite shipping costs that can be twice those of pipelines, it appears that crude oil shipments by rail are not just here to stay, but poised to keep growing. This is especially in light of the environmental issues that are raised when proposed large-scale pipeline projects like the Keystone XL reach the national stage. The continued delays of that project make it much less likely that we'll see crude oil pipeline projects out of the Bakken heading toward East or West Coast refineries being proposed any time soon.

    That means that well-positioned midstream companies like Plains All American will continue to enjoy success. The rail operators are also likely to keep winning with Canadian National offering investors more of a pure play, especially on Canadian crude from the oil sands. Finally, refiners like Phillips 66 that have secured cheaper crude for refineries on both coasts will enjoy higher profits all thanks to the rails.

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    • on:
      "Like I said, since you can't understand it, you continue to post wrong information.
      But almost everyone else can (Norris being the exception.)"

      LOL....more RLP-shuffel?

      And, Like I said....either explain exactly why the state numbers are incorrect.....or show us....so what did you do.....neither.

      You simply restated again that you are correct and the state numbers are not correct....well....maybe but no one knows yet....right?

      So,
      until you show us why.... you are just still playing your usual games.

    • RBN Energy has an article today stating rail capacity is nearly 1MM BOE/Day. Even uses ND Pipeline Authority figures. Maybe they should update their spreadsheets?

      • 1 Reply to rlp2451
      • They also say that they are the source of those numbers.....if you look at the data.

        While they may be right, the posted numbers by the state of ND are at 880,000 Bbls/day for 2013 for railroad takeaway capacity which are slightly different.

        A small part from that article:

        "In the space of just over one year North Dakota crude rail takeaway capacity has reached close to 1 MMBb/d. According to the North Dakota Pipeline Authority 58 percent of October 2012 Williston Basin production of over 800 Mb/d was transported out of North Dakota by rail. There are now 18 crude loading terminals operating in North Dakota on the BNSF and Canadian Pacific (CP) railroads. Today we continue our series on crude by rail with a North Dakota terminal inventory."

        "With 18 crude rail loading terminals of various sizes and capacities now operating in the North Dakota Bakken production area, the logistics challenge to find routes to market have come full circle from a famine of pipelines to a feast of rail. Looking ahead to the end of 2013 when production is expected to hit the 1 MMb/d mark, takeaway capacity by pipeline will be over 600 Mb/d and rail capacity will exceed 900 Mb/d – a total of 1.5 MMb/d – enough to handle surging production at least until 2014."

        And,
        these are THE NUMBERS (which we saw before) that are posted currently from the state of North Dakota:

        Pipeline takeaway for OIL in Bbls/day for The Williston Basin

        2008......272,000
        2009......286,000
        2010......337,500
        2011......413,000
        2012.....463,000

        2013.....658,000
        2014.....918,000
        2015.....1,018,000
        2016.....1,243,000

        Railroad takeaway for OIL in Bbls/day for The Williston Basin

        2008.....30,000
        2009.....95,000
        2010....115,000
        2011.....275,000
        2012.....730,000

        2013.....880,000
        2014.....880,000
        2015.....880,000
        2016.....880,000

    • Moving ND light crude to the east coast, did you catch the blurb on great lakes tankers. A refiner in Superior [Calumet I thinks] is talking about a shipping terminal to move tankers along the inland coast and to Atlantic refineries.

      A little bear said,
      About the time they get cranked up, the world will be in a glut copying what the US is doing, and all this infra structure will never reach full capacity. In about a year it would be advisable to keep an eye on reserve stocks and a finger on the sell button.

    • After all the nonsense you made about ND oil production down because of well decline rates?

      Gee maybe that is why Norfolk rail road went from below $60 to $68 in a few weeks?

      It's estimated that 52% of crude out of the Bakken is moved by rail, and pipeline operators pick up just 38% of shipments.

      Would you like to take this opportunity to admit you were completely wrong about production, take away and well decline rates?

      American wonder why our economy is not working the way it could and should. It matter Americans. It matters a great deal.

      • 3 Replies to norrishappy
      • norris, when I spotted this below I thought about that 10 TRILLION dollar folly about the Marcellus + Utica ....

        This was about the Eagleford:

        "The Eagleford Shale in southwest Texas is a premier liquids-rich development in the United States. With its higher-margin oil and natural gas/condensate, the Eagleford Shale is also among the most capital-efficient shale plays in Anadarko’s U.S. onshore portfolio.

        In 2011, industry activity in the Eagleford Shale generated more than $25 billion in total economic output. It provided $257 million in local government revenue to southwest Texas communities and an additional $358 million in state tax revenue source. The Eagleford Shale demonstrates the job creation that can be achieved through domestic oil and natural gas production, with southwest Texas counties recording some of the highest employment rates in the country."

        So.
        ....if they were about the same size in economic activity....would that be only about 400 years to get to ten trillion dollars in economic activity?

        Okay,
        ...so double the rate since things will probably increase....does that mean that it will only take 200 years to generate the $10,000,000,000,000 in economic activity that was posted?

      • Looks like some old news....since we already saw the numbers from the ND Pipeline Authority:

        Railroad takeaway for OIL in Bbls/day for The Williston Basin

        2008.....30,000
        2009.....95,000
        2010....115,000
        2011.....275,000

        2012.....730,000
        2013.....880,000
        2014.....880,000
        2015.....880,000
        2016.....880,000

        Pipeline takeaway for OIL in Bbls/day for The Williston Basin

        2008......272,000
        2009......286,000
        2010......337,500
        2011......413,000
        2012.....463,000
        2013.....658,000
        2014.....918,000
        2015.....1,018,000
        2016.....1,243,000

      • Tell us when you get your slow boat to China rigged up to gather helium. Maybe you and SOB can then build a helium balloon to go to the moon for his next project, Helium-3.

 
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