Rail Is Here To Stay In The Bakken - Bentek

Bakken Crude Rail Costs
Bakken Crude Rail Costs

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.

Continental - PBF Energy To Move Bakken Crude to Delaware

Plains Crude By Rail Costs
Plains Crude By Rail Costs

Continental has signed an agreement with PBF Energy to supply Bakken crude oil to Delaware City, DE.

Oil will be delivered to PBF Energy's double loop track at its Delaware City Refinery. Over the past year, Continental has moved crude to the West, East, and Gulf Coasts by rail to maximize crude oil price realizations. Areas paying international crude prices offer between a $10-15 premium over markets reflecting WTI prices.

Continental Resources COO, Rick Bott, added, "This unique transaction illustrates the emerging shift in the light sweet crude market. In addition to diversifying Continental`s customer base and streamlining our value chain, it allows us to deliver unblended premium Bakken crude to the East Coast - a market that has historically been driven by imports of foreign oil."

Continental's size allows the company to negotiate transactions like this one that aren't huge, but provide price security, while bypassing over supplied markets in the Mid-continent.

PBF`s CEO, Tom Nimbley, said, "PBF has made significant investments in acquiring rail cars and developing our East Coast rail delivery infrastructure to increase our access to North American crude oil, which positions PBF to benefit from these cost-advantaged crudes. Delaware City`s heavy and light crude rail discharge facilities allow us to work directly with producers in Canada and the Mid-continent, like Continental Resources, and provide us with a competitive advantage versus northeast refiners that rely on third parties to deliver North American crude oil."