Phillips 66 moving Bakken oil by rail in $1B deal

Fuel Fix ^ | January 9, 2013 | Zain Shauk

[JerseyHighlander]

Would look like it takes the Canadian route from Winnipeg to Montreal, then south to Albany, NY.

As a NJ resident, happy to see BayWay find a long term contract that is under market costs, the refinery is old and inefficient and prone to breakdowns, (and hurricane flooding ), it’s future is always in doubt due to a myriad of problems and a regulatory environment run by pinheads.

The equivalent costs to take a pipeline to TX/LA is not the total transportation cost of end use refined products, TX/LA refineries still have to load the products on tankers and move them tobarges to move them to Albany/Newburgh/Linden/Carteret/Port Reading gas terminals to get the products to the NYC metro market.

[Eric in the Ozarks]

Not likely in a multi line haul...

[Eric in the Ozarks]

$120,000 each.

[Eric in the Ozarks]

And delivery of new cars ordered today would be mid 2014 at the earliest.

[Capt. Tom]

Mr. Buffett owns Burlington Northern. This movement is on the Canadian Pacific.

The big winner here is Bill Ackman, the largest investor in Canadian Pacific Railway Ltd. -Tom

[woodbutcher1963]

The haul across country on a typical flatbed railcar is about $6000-7000. I am not sure what the railroads get for a tanker. However, I would think it is similar. Therefore, the revenue pay off is about 20 trips. I am not sure of the costs to haul it across on a train with 100 other cars. I would think they would pay off a capital investment like new tanker cars in a 2-3 year period.

[thackney]

$13~15 per barrel seems to be in line with that cost to transport. But that cost is not all profit. Do you know the typical margin in rail traffic?

[Eric in the Ozarks]

I think you’re right about the rate. Rental is $750 to $1,000/month (most cars are leased) plus about $9 to $10/bbl for the haul. Figure +/- 500 bbls per car.

I work with tank cars and freight rates every day. Unit train or no unit train, I don’t think a cross country run is doable in two weeks however. More like 6-8 weeks round trip.

[thackney]

So a 50,000 BPD delivery would require about 5,000 dedicated rail car fleet?

[Eric in the Ozarks]

With a continuous movement like this one, the RR tend to improve switching, etc., so it might not take a full 5,000 cars. I’d bet it would take all of 4,000 though...

[woodbutcher1963]

A straight through train will make it from SK to NY or VT in 4-5 days or less. These trains do not stop except to change crews.
They operate similar to a coal train where all 100 cars on the train carry the exact same commodity and are all going to the same power plant. There are no stops along the way to interchange and remove cars that are to be deliverd in Winnipeg, Thunder Bay, Toronto, or Montreal. It is about 2300 miles from Portal, SK to Albany, NY. Keep in mind these trains travel 24 hours a day.

Once they are in NY, the backup is how long does it take to unload the cars and get them turned around. I am sure they do not have a siding to unload more than 10-15 cars a day. It may take a week just to unload the train once it is in port. Hey its logistics.

[railroader]

Not likely in a multi line haul...

The originating railroad's locomotives run through to destination. Or exchange of power at the interchange point is well-coordinated. In any case, transit times are likely no more than a week in each direction (and could be as little as four or five days). Only stops made are for crew changes and to wait for other train traffic.

[Eric in the Ozarks]

Coal trains fly via continuous welded rail and on a one line haul out of Gillette. Moving from ND to the east will not be as easy.
To your question on weights, tank cars are 263,000 pounds gross, with typical 188,900 pounds net. The difference is the weight of the car.

My business deals in the heavy oils; asphalts, residuals, roofing flux and similar products. Much of the product I move is negative gravity (0 to -4 API.) A tanker load of flux might contain 22,000 gross gallons but be sold as 19,900 net gallons (corrected to 60 F.)

[railroader]

The Keystone XL includes loading points for the Bakken area. It certainly would move a lot of Alberta oil/bitumen, but it plans to move oil out of ND as well. There are several other pipelines planned as well, not to mention the majority of the Bakken Crude moves out on existing pipelines already.

Exactly. A lot of the pipeline capacity will be used by the Alberta oil sands, so Bakken production will always exceed pipeline capacity, present or future. Since Bakken ships to more than just Texas and Louisiana refineries, and that there is little or no pipeline capacity to northeastern points, the railroad is the only way to go in some cases.

Warren Buffet's opposition to the Keystone XL pipeline may or may not have to do with him owning BNSF, but the railroads were getting crude oil business before the pipeline was even announced. They were able to do this because a lot of 30,000 gallon tank cars intended for ethanol service in the mid-2000s were left in storage. Now that the Bakken oil business is good for the railroads and shippers, new tank cars built for crude oil shipments are being purchased by leasing companies and at least one shipper (Phillips 66).

[Osage Orange]

CNI has been a good stock to own.....

If I recall correctly...BNSF was bot by Buffet in '09....Probably after him and Obanana had a meeting.

[Eric in the Ozarks]

Can the super jumbos go east ?

I don’t use anything but 23,500’s.

[Eric in the Ozarks]

I have always wanted to take a trip down this canal. Something in the order of a 52 foot Sea Ray with a pilot would be to my liking...

[thackney]

I am sure they do not have a siding to unload more than 10-15 cars a day.

How can they deliver 50,000 BPD unloading only 15 cars per day. Don't they need to average 100 cars per day?

[Eric in the Ozarks]

I’m rooting for them to succeed but the volume in all this is a bit intimidating.

I keep seeing the proposed 100 car trains being loaded every day, slamming into the reality of railroading in the eastern US.

What this proposes is much more than utility supply unit trains (where the utility owns the cars and wants to see them move.) The eastern rail lines have too many choke points for the proposed 100 cars/day.

[thackney]

Now multiply that challenge by at least 10 and you get the volume the Keystone XL would be delivering.