A handful of new East Coast terminals that will pump Bakken and other crude from trains onto barges may end demand for imported light, sweet oil in the U.S. Northeast, the latest twist in the shale revolution that is reshaping the market.
By mid-year, new rail-to-barge facilities in Pennsylvania and Virginia will be able to unload more than 200,000 barrels per day (bpd) of crude, enough for refiners like PBF Energyor Phillips 66 to replace their remaining barrels of Nigerian or Norwegian oil, analysts say. A third facility in New Jersey may add to the flow soon.
The new terminals are part of a massive wave of investment into North American oil transportation and logistics, fueled by the emergence of fast-growing shale production in remote places like North Dakota. Output is rising so quickly it is already threatening to saturate the U.S. Gulf Coast refining hub, meaning more crude may be moving east or west.
On a recent evening, klieg lights illuminated the site of a former power plant in Eddystone, an industrial town on the Delaware River outside Philadelphia. More than 500 workers have been working through the night since October to lay fresh train tracks, retrofit a storage tank and install the machinery that will load and unload a mile-long, 118-car oil train in a day.
The crude will be piped to docks, where 145,000-barrel barges will ferry it to a clutch of refiners less than 10 miles
(16 km) away. Canada's Enbridgeand partner Canopy Prospecting aim to have the terminal running by the end of March, and may double capacity to 160,000 bpd by the end of next year.
It is not yet clear exactly how markets will adjust to the new capacity. Local refiners have spent tens of millions of dollars building their own rail offloading terminals direct to their doorsteps. Keeping some overseas imports flowing may provide a more varied slate of crude and provide useful bargaining power with domestic shippers.
On paper, however, the new capacity could shut the door on imports of lighter, low-sulfur crude into a half-dozen East Coast refiners. Such shipments, which ran in excess of 800,000 bpd just a few years ago, have fallen this year from 400,000 bpd in the first quarter to less than 240,000 bpd in October and November, according to U.S. government data.
The new capacity to take Bakken crude will "just shut down imports," said David St. Amand, president of Navigistics Consulting, a shipping consultancy.
In December, the first trains began rolling in to Plains All American's140,000 bpd rail-to-barge terminal at a former refinery in Yorktown, Virginia. It is unclear how much oil is flowing through the facility, but industry observers said that barges are moving crude to the Philadelphia Energy Solutions refinery, a trip of around 200 miles (322 km).
EAST COAST REVIVAL
The shale boom has been a godsend for East Coast refinery operators like Monroe Energy, a subsidiary of Delta Air Lines, and Carlyle Group's joint-venture PES, which runs a 330,000 bpd plant in Philadelphia, the area's largest.
Most of the domestic crude now arriving on the East Coast is coming by rail to purpose-built terminals at the refiners themselves. PBF Energy currently brings 80,000 to 90,000 bpd of light crude, with construction under way to bring that up to 130,000 bpd, executives said this month. PES brought its direct crude-by-rail capacity to 200,000 bpd in the third quarter.
Even with rail costs of up to $10 a barrel, Bakken is still
"vastly superior" to imports priced off of European benchmark Brent, said PES chief executive Philip Rinaldi.
After decades of near total dependence on imported crude, PES now runs 75 percent domestic oil, he said. On top of its own rail terminal, it also takes in some 25,000 bpd by barge via Sunoco's multimodal terminal in Eagle Point, New Jersey.
Now, new rail-to-barge terminals offer even more flexibility for refiners from Delaware to Newfoundland that process up to 1.8 million bpd.
Until last year, the two major rail-to-barge terminals operating in the region were in Albany, New York, where as much as 220,000 bpd is transferred onto barges down the Hudson River to Bayway, New Jersey, or up to Canadian refiner Irving Oil in St. John, New Brunswick. (For a full list of crude-by-rail projects in the U.S., see [ID:nL2N0KN1DC])
Buckeye Partners LP is due to finish an overhaul of its Perth Amboy terminal in New Jersey by mid-year, including a crude offloading facility, four docks, and pipeline connectivity, said Kevin Goodwin, vice president and treasurer. He would not disclose its capacity, but confirmed the company is in discussions with customers to bring Bakken crude by rail.
By mid-year, new rail-to-barge facilities in Pennsylvania and Virginia will be able to unload more than 200,000 barrels per day (bpd) of crude, enough for refiners like PBF Energy
The new terminals are part of a massive wave of investment into North American oil transportation and logistics, fueled by the emergence of fast-growing shale production in remote places like North Dakota. Output is rising so quickly it is already threatening to saturate the U.S. Gulf Coast refining hub, meaning more crude may be moving east or west.
On a recent evening, klieg lights illuminated the site of a former power plant in Eddystone, an industrial town on the Delaware River outside Philadelphia. More than 500 workers have been working through the night since October to lay fresh train tracks, retrofit a storage tank and install the machinery that will load and unload a mile-long, 118-car oil train in a day.
The crude will be piped to docks, where 145,000-barrel barges will ferry it to a clutch of refiners less than 10 miles
(16 km) away. Canada's Enbridge
It is not yet clear exactly how markets will adjust to the new capacity. Local refiners have spent tens of millions of dollars building their own rail offloading terminals direct to their doorsteps. Keeping some overseas imports flowing may provide a more varied slate of crude and provide useful bargaining power with domestic shippers.
On paper, however, the new capacity could shut the door on imports of lighter, low-sulfur crude into a half-dozen East Coast refiners. Such shipments, which ran in excess of 800,000 bpd just a few years ago, have fallen this year from 400,000 bpd in the first quarter to less than 240,000 bpd in October and November, according to U.S. government data.
The new capacity to take Bakken crude will "just shut down imports," said David St. Amand, president of Navigistics Consulting, a shipping consultancy.
In December, the first trains began rolling in to Plains All American's
EAST COAST REVIVAL
The shale boom has been a godsend for East Coast refinery operators like Monroe Energy, a subsidiary of Delta Air Lines
Most of the domestic crude now arriving on the East Coast is coming by rail to purpose-built terminals at the refiners themselves. PBF Energy currently brings 80,000 to 90,000 bpd of light crude, with construction under way to bring that up to 130,000 bpd, executives said this month. PES brought its direct crude-by-rail capacity to 200,000 bpd in the third quarter.
Even with rail costs of up to $10 a barrel, Bakken is still
"vastly superior" to imports priced off of European benchmark Brent, said PES chief executive Philip Rinaldi.
After decades of near total dependence on imported crude, PES now runs 75 percent domestic oil, he said. On top of its own rail terminal, it also takes in some 25,000 bpd by barge via Sunoco's multimodal terminal in Eagle Point, New Jersey.
Now, new rail-to-barge terminals offer even more flexibility for refiners from Delaware to Newfoundland that process up to 1.8 million bpd.
Until last year, the two major rail-to-barge terminals operating in the region were in Albany, New York, where as much as 220,000 bpd is transferred onto barges down the Hudson River to Bayway, New Jersey, or up to Canadian refiner Irving Oil in St. John, New Brunswick. (For a full list of crude-by-rail projects in the U.S., see [ID:nL2N0KN1DC])
Buckeye Partners LP is due to finish an overhaul of its Perth Amboy terminal in New Jersey by mid-year, including a crude offloading facility, four docks, and pipeline connectivity, said Kevin Goodwin, vice president and treasurer. He would not disclose its capacity, but confirmed the company is in discussions with customers to bring Bakken crude by rail.
