M II A II R II K
Nov 6, 2012, 4:28 AM
Crude-by-rail carves out long-term North American niche
Nov 4, 2012
By Nicole Mordant
Read More: http://www.reuters.com/article/2012/11/04/us-railways-oil-northamerica-idUSBRE8A30AX20121104
In this era of pipelines spanning thousands of miles, the idea of shipping crude across North America in railway cars might seem a quaint throwback to the oil pioneering days of the West. Yet it's a booming business for North America's railroads, and should remain an important niche market for years to come.
Shipments of crude by rail in the United States have surged from around 11,000 barrels per day in 2007 to an estimated 340,000 bpd in 2012, according to data from the Association of American Railroads. If rail shipments in Canada are added, the volume could top 400,000 bpd, more than 4 percent of North American crude production and equal to a new, large pipeline. Crude shipments are now the fastest-growing product for several big U.S. and Canadian Class 1 railroads after oil output expanded more quickly than pipeline capacity, particularly in the oil-rich Bakken area of North Dakota.
Railroads allow producers to take advantage of a temporary oil price differential by moving crude from inland oil fields to coastal refineries that pay higher prices linked to Brent crude. Pipelines are either full, or don't reach these refineries. "We don't expect for the long term that you're going to see a 300 percent growth in crude oil trends," Union Pacific Corp's Jack Koraleski, chief executive of the biggest U.S. publicly traded railroad, said in an interview. "We think we're going to continue to grow the oil business. The rate of growth will slow from its current over-excited pace, but we still think it will continue to be a good business for us."
The planned expansions of pipelines like the mid-continent Seaway line in the first quarter of 2013 should displace some rail capacity, as pipelines are a cheaper option than rail. But experts say railways have proved that they can have a lasting role as crude shippers, especially when major pipeline projects such as Keystone XL and Northern Gateway are snarled in politics in the United States and Canada. "Even if the large growth that we have seen over the last few years does subside, rail will continue to be an important part of the total distribution capacity out there, particularly on a flex basis or a peaking capacity basis, because the model has been proven," said Steve Hansen, a transportation analyst with Raymond James in Vancouver.
.....
Nov 4, 2012
By Nicole Mordant
Read More: http://www.reuters.com/article/2012/11/04/us-railways-oil-northamerica-idUSBRE8A30AX20121104
In this era of pipelines spanning thousands of miles, the idea of shipping crude across North America in railway cars might seem a quaint throwback to the oil pioneering days of the West. Yet it's a booming business for North America's railroads, and should remain an important niche market for years to come.
Shipments of crude by rail in the United States have surged from around 11,000 barrels per day in 2007 to an estimated 340,000 bpd in 2012, according to data from the Association of American Railroads. If rail shipments in Canada are added, the volume could top 400,000 bpd, more than 4 percent of North American crude production and equal to a new, large pipeline. Crude shipments are now the fastest-growing product for several big U.S. and Canadian Class 1 railroads after oil output expanded more quickly than pipeline capacity, particularly in the oil-rich Bakken area of North Dakota.
Railroads allow producers to take advantage of a temporary oil price differential by moving crude from inland oil fields to coastal refineries that pay higher prices linked to Brent crude. Pipelines are either full, or don't reach these refineries. "We don't expect for the long term that you're going to see a 300 percent growth in crude oil trends," Union Pacific Corp's Jack Koraleski, chief executive of the biggest U.S. publicly traded railroad, said in an interview. "We think we're going to continue to grow the oil business. The rate of growth will slow from its current over-excited pace, but we still think it will continue to be a good business for us."
The planned expansions of pipelines like the mid-continent Seaway line in the first quarter of 2013 should displace some rail capacity, as pipelines are a cheaper option than rail. But experts say railways have proved that they can have a lasting role as crude shippers, especially when major pipeline projects such as Keystone XL and Northern Gateway are snarled in politics in the United States and Canada. "Even if the large growth that we have seen over the last few years does subside, rail will continue to be an important part of the total distribution capacity out there, particularly on a flex basis or a peaking capacity basis, because the model has been proven," said Steve Hansen, a transportation analyst with Raymond James in Vancouver.
.....