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Oil via rail

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Oil via rail

Unread postby ROCKMAN » Sat 09 Nov 2013, 15:16:33

Reuters - "Independent U.S. refiner Tesoro Corp has tripled the amount of North Dakota Bakken oil delivered by crude-only trains to its northern California refinery since the first such shipment in September, Chief Executive Greg Goff said on Thursday. He said the 166,000 barrels-per-day (bpd) Golden Eagle refinery in Martinez is running about 350,000 barrels per month from three so-called "unit trains" that carry only crude. The first unit train arrived in September. "It really just started and is just ramping up," Goff said.

However, he said the third-party offloading facility handling the incoming trains is "pretty much maxed out," so deliveries cannot ramp up further until Tesoro's joint-venture $100 million rail-to-barge oil terminal starts up at a port in Washington. Both initiatives are part of Tesoro's overall plan to run more inland U.S. and Canadian heavy crudes, which are cheaper than imports, at its West Coast refineries. Rail is a critical factor in getting those crudes to the West Coast, as no major pipelines move crude to that market. Tesoro already runs 50,000 bpd of Bakken crude at its 120,000 bpd refinery in Anacortes, Washington, where the company started up a crude offloading facility more than a year ago. Phillips 66 and BP Plc also have rail offloading projects in the works to do the same."

It seems rail shipment of oil was an overlooked opportunity until the battle over new pipelines flared up. Both the rail companies and oil producers are developing the economics learning curve needed to expand the process. Inadvertently in appears that opposition to pipelines to haul oil to coastal areas and allow overseas exports has created a process to do so much quicker and with much more flexibility than pipelines would have accomplished. And, in time, if the pipelines are eventually built even more transport capability will exist than if the pipelines would have been built sooner. The combined p/l and rail transport may put sufficient downward pressure on cost so even more marginal reserves may be developed. Perhaps one case of unintended consequences.
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Re: Oil via rail

Unread postby Synapsid » Sat 09 Nov 2013, 16:02:31

ROCKMAN,

Shell has a proposal going too, also in Anacortes (where the Tesoro refinery is.)

Jumpin' times up here.
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Re: Oil via rail

Unread postby Tanada » Sat 09 Nov 2013, 16:13:48

IMO for those fields that are projected to have a rapid increase-BOOM-Bust cycle like North Dakota rail makes far more economic sense than building a pipeline that will have to pay for itself in a very short time frame after construction. If they started a pipeline tomorrow and finished it in 2015 but the field peaks out in 2020 and is far down the decline slope by 2025 that only gives 7 or 8 years of profit potential.
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Re: Oil via rail

Unread postby Plantagenet » Sat 09 Nov 2013, 18:24:54

There is a new proposal afoot to ship Canadian tight oil and tar sands oil to Asia via a rail connection through Alaska.

Canada is having trouble getting the "first nations" to agree to a pipeline and oil port to the Canadian west coast. A new idea is to build a rail link into central Alaska to connect with the trans-Alaska pipeline. The pipeline is already built and oil terminal infrastructure already exists at Valdez. The rail right-of-way can follow the existing Alaska Highway and connect the Canadian rail system to the Alaska rail system.

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Re: Oil via rail

Unread postby Paulo1 » Sat 09 Nov 2013, 18:48:33

As I mentioned a few days ago about protests regarding Northern Gateway, hauling by rail along the Alaska Hwy won't happen, either. I spent years working as a bush pilot in Yukon, and the idea of a new rail line following the Alaska highway is pretty nutso, imho. First of all, you have the 1st nations to deal with. They are pretty well looked after up there as is the entire Territory. They're doing not too bad right now. Certainly better regarded and accomodated to than natives in BC. Also, there would be little incentive for this project by either whites or natives. There are also numerous mountain ranges to cross. I have seen forest fires and mudslides knock out the highway for days. Furthermore, is it suppose to go through Kluane Natl. Park? Down the Whitepass? We're talking rugged country.

If it doesn't head south through a keystone xl, I believe excess will move by rail south on existing or expanded lines, bypassing any choke points until a terminal exists that will take it. From there it will go to the highest bidder, maybe US and maybe Asia. Just my opinion.

I used to fly local chiefs and others surveying the land for land claims. They log it, and they trap it, allow mining exploration, but I don't know if they are gracious enough to allow a rail line hauling bitumen.

These companies might own some politicians and/or political parties. They might own or have pet news media. Hearts and minds of residents....not so much.

Regards....Paulo
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Re: Oil via rail

Unread postby rollin » Sat 09 Nov 2013, 20:15:45

This is mostly about cost, cutting cost of transportation and using a lower cost fuel. The use of barges from Vancouver would not only allow more Bakken oil to be offloaded but also reduce transportation costs to the refinery. Bakken oil typically sells at a discount to WTI. Increasing direct rail transport quantities can involve new trackage since many lines are running near max capacity now.

The industry may face some cost increases due to the Lac Magantic Bakken oil disaster. Oil rail cars may have to be built to higher standards to resist impact better during accidents. That would involve large expenditures.

By the way "so called unit trains" are just that, unit trains. They carry only a single product, oftentimes destined for a single destination. Bakken oil trains have been running through the eastern US for years now.
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Re: Oil via rail

Unread postby Plantagenet » Sat 09 Nov 2013, 20:45:46

Paulo1 wrote: is it suppose to go through Kluane Natl. Park? Down the Whitepass? We're talking rugged country.


1. As I said, its supposed to follow the Alaska Highway corridor. The Alaska Highway corridor doesn't go through Kluane Natl. Park or over White Pass.

2. Trains have been built through lots of "rugged country" over the last 150 years.

-------
I'm not saying this rail project will get done, but the idea is getting some attention here in Alaska.
Last edited by Plantagenet on Sat 09 Nov 2013, 20:54:28, edited 1 time in total.
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Re: Oil via rail

Unread postby ROCKMAN » Sat 09 Nov 2013, 20:53:17

Rollin - ...can involve new trackage " So far it seems the great majority of the infrastructure expansion has been expanding the terminals. Hooking up unit trains wasn't a problem but unloading 200 tankers in a few hours was the hang up. As I understand the process it involves installing piping that allowed many tankers to be unloaded simultaneously and adding the bulk tankage. Compared to the time and cost factors I gather it's a much easier option. I haven't heard anything yet about laying new track or difficulties with scheduling runs. Perhaps some additional sidings.
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Re: Oil via rail

Unread postby Plantagenet » Sat 09 Nov 2013, 21:00:50

In fact, extending the railroad system eastward has already begun in Alaska

northern rail expansion---phase one

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New Alaska RR bridge now being built to extend Alaska RR to the east.

------------

Alaskans have long wanted a rail link to Canada and the lower 48. The possibility of shipping Canadian oil to Asia through Alaska is just another component in the planning for such a rail link. 8)
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Re: Oil via rail

Unread postby rollin » Sat 09 Nov 2013, 22:52:32

ROCKMAN wrote:Rollin - ...can involve new trackage " So far it seems the great majority of the infrastructure expansion has been expanding the terminals. Hooking up unit trains wasn't a problem but unloading 200 tankers in a few hours was the hang up. As I understand the process it involves installing piping that allowed many tankers to be unloaded simultaneously and adding the bulk tankage. Compared to the time and cost factors I gather it's a much easier option. I haven't heard anything yet about laying new track or difficulties with scheduling runs. Perhaps some additional sidings.


I meant if they use more southern routes to increase direct delivery by rail. Increasing yard sizes and adding parallel tracking (double tracking) in stretches has been going on for a few years now. Major railroads are often fully scheduled in sections, thus adding and routing more trains becomes problematical.

Single tracking was the answer to the economic fall after world war II but has proved a major bottleneck for fast freight across the country. The process is slowly being reversed. Right now a single problem propagates through major parts of a system. Adding a single train or changing it's schedule can cause major scheduling problems.
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Re: Oil via rail

Unread postby Keith_McClary » Sun 10 Nov 2013, 01:12:56

Plantagenet wrote:There is a new proposal afoot to ship Canadian tight oil and tar sands oil to Asia via a rail connection through Alaska.
...
A new idea is to build a rail link into central Alaska to connect with the trans-Alaska pipeline. The pipeline is already built and oil terminal infrastructure already exists at Valdez. The rail right-of-way can follow the existing Alaska Highway and connect the Canadian rail system to the Alaska rail system.
Why stop in Alaska:
Russia to build $65 billion tunnel to AlaskaImage
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Re: Oil via rail

Unread postby WildRose » Sun 10 Nov 2013, 01:50:42

I sure hope that if any expansion of transporting oil by rail happens, there will also be an expansion in the maintenance/monitoring of the rail lines. There have been about 5 derailments in Alberta/Saskatchewan in the last 4 weeks or so, a few of them including dangerous goods that caused environmental damage, fires, evacuations. And there was the near-miss in Calgary back in the spring when the rail cars almost lost their product to the Bow River.
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Re: Oil via rail

Unread postby ROCKMAN » Sun 10 Nov 2013, 07:31:19

Rose : " I sure hope that if any expansion of transporting oil by rail happens". It's already happened: 2008: 9700 rail car loads. 2012: 235,000 rail car loads. And according to the DOT spillage per mile transported for pipelines was about 3X greater for pipelines than for rail during 2008-2012. OTOH the only way to ensure zero rail spills is to never transport oil by train.
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Re: Oil via rail

Unread postby WildRose » Sun 10 Nov 2013, 10:56:25

ROCKMAN wrote:Rose : " I sure hope that if any expansion of transporting oil by rail happens". It's already happened: 2008: 9700 rail car loads. 2012: 235,000 rail car loads. And according to the DOT spillage per mile transported for pipelines was about 3X greater for pipelines than for rail during 2008-2012. OTOH the only way to ensure zero rail spills is to never transport oil by train.


Yeah, I know, ROCKMAN. But this has been a bad year - it will be interesting to see how much higher the rate of spill was for 2013. From what I hear from people who know the business (people who work or have worked for CNR) a lot of equipment needs to be replaced and there aren't enough people to maintain the rail lines and make sure sections of the lines are in good enough shape. From my personal perspective, the potential for disastrous consequences exists in my city and surrounding area every day - long trains with lots of cars carrying dangerous goods, and so many people living just blocks away from rail lines.
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Re: Oil via rail

Unread postby rollin » Sun 10 Nov 2013, 11:31:54

Another oil train disaster, this time burning in Alabama.

http://www.latimes.com/nation/nationnow ... z2kGFVvSxD
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Re: Oil via rail

Unread postby ROCKMAN » Sun 10 Nov 2013, 11:32:30

Yep...seen the stories about CNR needing to beef up in a variety of areas. And I think I read that the govt is in the process of increasing a variety of safety specs. The problem from the risk management angle is that the events tend to be rather rare but can have major preprecussions. Thus the stats don't tend to be very useful as far as making predictions go.
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Re: Oil via rail

Unread postby ROCKMAN » Sun 10 Nov 2013, 15:52:53

A side story to the Keystone XL Pipeline. As previously noted record amounts of oil sands production is being accomplished without the permit of the border crossing section. That capacity is not only on the verge of major expansion but includes the potential to ship that oil to market other than those in the US:

"Reuters- Canadian midstream company Gibson Energy Inc and logistics provider U.S. Development Group (USDG) said they will build a 140,000-barrel-per-day terminal in Hardisty, Alberta, to ship oil sands crude by rail. The project would be the largest terminal for western Canada, where demand to move crude by rail has been gathering pace as producers look for ways to ease congested export pipelines. It also underlines how the runaway fuel-train accident that killed 47 people in the town of Lac-Megantic, Quebec, last month appeared unlikely to halt Canada's crude-by-rail boom. The terminal, due to be operational by the first quarter of 2014, would be able to handle two unit trains of up to 120 railcars per day and load multiple grades of crude oil for transport to refining markets across North America. Hardisty is one of the two main storage hubs for the Canadian oil sands and the starting point for export pipelines to the U.S. Midwest. "The Hardisty Rail Terminal will give Canadian oil producers flexibility to obtain the best value for their product and (give) refiners expanded access to price advantaged crude oil supplies," said Mike Day, USDG's vice president. Lack of space on pipelines led to crude bottlenecks and deep discounts on heavy Canadian crude, compared to the West Texas Intermediate benchmark earlier this year as producers struggled to get access to markets in the United States. Term contracts have already been signed with four customers for approximately 100,000 bpd and Rick Wise, Gibson's senior vice president of operations, said discussions were underway with several customers about further shipping commitments. The rail terminal would be served by Canadian Pacific Railway Ltd, and all crude loaded there would be pumped from Gibson's 4-million-barrel Hardisty crude terminal, located 5 kilometres away. "The Hardisty Rail Terminal will be a significant rail hub and is located on CP's high-capacity north main line with efficient access to the refining markets across North America," said Tracy Robinson, CP vice president of energy and merchandise."

Just saw some stats as to why rail transport has taken off so quickly. Typically it can take 10 -15 years for a major pipeline project to recover it's initial investment. The various infrastructure expansions of oil rail transport are taking two years or so to recover the investment. Thus a much shorter (and thus less risky) commitment is required. If some folks didn't realize: major expansion of pipelines are not down on spec: they require long term and guaranteed commitments from the oil owners. In time pipeline expansion could undercut rail transport. But if a rail infrastructure project has paid out it need only cover the operation cost to reach the breakeven point on profitability. At that point tariffs can be reduced to compete with a pipeline. Rail also has another significant advantage over a pipeline: transit time. A surprise to some that moving oil from Point A to Point B via rail is much faster than going via a pipeline. Given the volatility of the oil market this factor also reduces risks especially for the buyers.
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Re: Oil via rail

Unread postby WildRose » Sun 10 Nov 2013, 16:35:03

rollin wrote:Another oil train disaster, this time burning in Alabama.

http://www.latimes.com/nation/nationnow ... z2kGFVvSxD


Thankfully this one happened far enough away from town that no one was injured and it looks like no one had to evacuate. There will likely be some local environmental damage though.
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Re: Oil via rail

Unread postby WildRose » Sun 10 Nov 2013, 16:43:48

ROCKMAN, thanks for that additional info. I was actually surprised that oil moves faster by rail than pipeline. Is that always the case, I wonder?

With more oil moving by rail (and other dangerous products) it looks like a number of changes need to be made for the process to be safer, what with long trains, fast speeds, more volatile liquids and gases in tanks that of course rupture under the pressure of heavy cars plowing into them in a derailment, not to mention aging infrastructure and inadequate inspection of lines.
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Re: Oil via rail

Unread postby Keith_McClary » Sun 10 Nov 2013, 19:56:50

WildRose wrote:so many people living just blocks away from rail lines.

I lived near the far end of the train in the first pic.
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