Moving crude oil by rail is here to stay for the foreseeable future. That was the message delivered multiple times at Bentek's annual Benposium conference in Houston.
Wide spreads in WTI and waterborne oil prices have made rail receipts attractive on the East and West Coasts. Once oil is committed to rail, it's there to stay.
"When barrels are committed to rail terminals, rail wins" state Rusty Braziel of RBN Energy at Bentek's Benposium conference.
Well, at least for some period oil will utilize rail. Many rail terminals have very short paybacks that make developing the facilities attractive even if they are only utilized for 1-2 years.
Over 50% of the crude oil produced from the Bakken is being moved by rail and all indications point to that being the case for some time. Prices are better at rail delivery points. The Gulf Coast is seeing growing production from the Eagle Ford and Permian, which only puts more pressure on prices to the South.
“Over time oil will begin moving back onto pipes, but its going to be a fight. Pipelines will always be the most efficient way to move crude, but they’ll have to be competitive on pricing and be able to deliver crude into competitive markets. ”
It's not surprising, but Bentek also noted that Bakken production has grown twice as fast as anyone thought in 2011. Current production is approximately what analyst were predicting for 2016. The play is just three years ahead of schedule!
Bentek's Benposium conference is held in Houston each Spring.