Rail Is Here To Stay In The Bakken - Bentek

May 15, 2013 R.T. Dukes

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.

Thunder Butte Petroleum Services Refinery Ground Broken

May 10, 2013 R.T. Dukes

Ground has been broken at the site of the Thunder Butte Petroleum Services Refinery southwest of Minot, ND. Three affiliated Indian tribes have joined together for the $450 million project that will be constructed on a 476-acre site.

This is the second refinery to break ground in the past two months. The Dakota Prairie Refinery Groundbreaking was held in March near Dickinson.

“It`s really an important time for our people. It`s exciting,” said tribal representative Ken Hall. “But we have to be mindful going forward to not lose our culture.”

Full-scale construction will start on the Thunder Butte Refinery in August and will be completed in phases over the next two years.

Once completed, the refinery will employee 100 people and refine 20,000 b/d of Bakken crude into diesel and other petroleum products.

You can read about the entire process at mharefinery.com

Tesoro & Savage Building Crude Unloading & Marine Loading Facility - Vancouver, WA

April 23, 2013 R.T. Dukes

Tesoro and Savage Companies plan to build a 120,000 b/d crude-by-rail unloading and marine loading facility in Vancouver, Washington. The facility will be a likely destination for crude from Western Canada and the Bakken. the marine loading facility will provide access to multiple refineries along the West Coast. The facility is expected to cost between $75 and $100 million, with an in service date of some time in 2014. Initial capacity will be 120,000 b/d, with expansion capability up to 280,000 b/d. Approximately 40,0000 b/d of Bakken crude is already moving to refineries in Washington.

This development means crude volumes moving west could grow to 160,000 b/d. The Bakken provides the perfect supply source for a project like this.

“Building upon the recent success of the rail unloading facility at our Anacortes, Wash., refinery, where we have been delivering Mid-Continent crude oil via unit train in an environmentally sound and cost-effective manner, this project is the ideal next step for Tesoro as we drive additional feedstock cost advantage to the remaining refineries in our West Coast system.”

— Greg Goff, CEO of Tesoro

You can read more about oil prices received on the West Coast in the article Bakken Crude Can Get Premium Prices On the West Coast.

“We are looking forward to bringing crude oil destination services to the Port of Vancouver.”

— Kirk Aubry, COO of Savage.

The initial lease agreement is for ten years with the Port of Vancouver. Savage will oversee the design, construction, and operation of the facility.

Read more in the press release at tsocorp.com

Continental - PBF Energy To Move Bakken Crude to Delaware

April 19, 2013 R.T. Dukes

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."

Dakota Plains Pioneer Project Under Construction

April 15, 2013 R.T. Dukes

Dakota Plains has started construction on the Pioneer Project. The expansion of the New Town rail facility will increase throughput capacity from 30,000 b/d to 80,000 b/d.

Once complete, the facility will include:

Two 8,300 ft loop tracks, with each capable of handling 120 car unit trains
Ten tank car load out building
Two 90,000 barrel storage tank (180,000 bbls)
Ten truck stations
Five pipeline interconnections.

World Fuel Services Senior Vice President, Supply and Trading, Mr. Carlos Cuervo said: "The Pioneer Project will further expand our Bakken crude oil marketing capabilities. We are excited to be playing a major role in expediting this project."

The facility will utilize a total of 192 acres and is designed with the ability to expand to 270,000 bbls of storage. The site has four existing, 2,500 ft tracks that will be used for inbound oilfield supplies, such as sand and fuel.