Statoil Bakken Crude Moving by Rail - Leasing 1,000+ Railroad Cars

Statoil's crude production from the Bakken is gaining additional capacity out of the region. The company plans to lease 1,000+ railroad cars to help alleviate transportation bottlenecks. The number of railcars leased will give the company capacity to move up to 45,000 b/d. That's more than Statoil produces, but the railroad cars can act as a form of storage as well. With railroad cars, the company has the option to sell crude in Canada, the East Coast, or the Gulf Coast. With discounts that stretch as high as $20 per barrel locally, it's easy to rationalize making this investment. Pipeline capacity constraints plague North Dakota and Montana because local demand is far outstripped by supply. Many operators are finding the Gulf Coast market offers the best price realizations (Louisiana Light Sweet Prices). WTI is largely being bypassed for other demand centers. Cushing, where WTI is priced, is addressing its own problems, so Canada and the coasts are better destinations.

Nowhere is the challenge more apparent than in North Dakota, which this year unseated Alaska as the country's second-largest oil-producing state. In May the state produced 639,000 barrels per day, or about 10% of the oil produced in the U.S., up from 364,000 barrels per day in May 2011, according to the U.S. Energy Information Administration.

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