Oil companies are shipping crude from the massive Bakken oil field in North Dakota and Montana to their coastal refineries but it isn't easy.
Mike Wirth, executive vice president for the downstream and chemicals division of Chevron Corp., discussed the challenges his company faces in Bakken crude transportation to the West Coast on Friday during a conference call with analysts.
QUESTION: What type of transportation methods are you looking at to ship crude from the Bakken field to refineries on the West Coast?
RESPONSE: We have run Bakken crude on the West Coast already. We have run Eagle Ford (Texas) at Pascagoula (Miss.), not in large volumes, but we do understand the logistics to get those discounted crudes into our big coastal refineries....
On this crude disconnect, it is like real estate. It is location, location, location. And our large coastal refineries are distant from where these advantages really are.
You can get Bakken crude up into the Pacific Northwest via rail. You then have the challenge of how do you get it down to the West Coast. You can do that with barge, you can do it with further rail and so you have got trans-shipment costs. And then you have got to have the offloading capability in your refineries and our refineries really weren't set up for large rail-based receipts of crudes.
So the logistics are tough into the coastal refineries. They are very good into a couple of our smaller refineries. Our refinery in British Columbia and our refinery in Salt Lake City have pipeline connections to discounted crudes and have been able to take full advantage of that....
And so you're constantly optimizing the crude slates on your landed cost of crude via rail or versus these other modalities.