Understanding Crude Oil Transportation by Rail
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Trisha Curtis, Director of Research, Upstream and Midstream Energy Policy Research Foundation, Inc. (EPRINC) EPA Brown Bag Lunch Presentation November 12th, 2014 Understanding Crude Oil Transportation by Rail 2 About EPRINC • www.eprinc.org • Infrastructure Paper http://eprinc.org/wp- content/uploads/2013/10/EPRINC- PIPELINES-TRAINS-TRUCKS-OCT31.pdf • Oil and Gas Journal • Embassy Series • Presentations at Imperial College London, Colombia University, Wyoming Pipeline Authority • Department of Energy – Quadrennial Energy Review • Department of Defense • Rin App http://eprinc.org/2014/02/rins- around-rosy-app-available-ios/ 3 North American Oil Production 14000 12000 10000 Canadian Crude Oil Production 8000 U.S. Field Production of Crude Oil Mbbl/d 6000 4000 Thousand Barrels Per Day Thousand Per Barrels 2000 U.S. 8.7 mbd Canada 3.5 mbd 0 August North America = 12.2 mbd Source: EIA 4 Permit Activity Williston Basin Powder River Basin DJ Basin (Niobrara Reservoir) Uinta Basin Utica Permian Anadarko Basin (Mississippian, Granite Basin Wash, Mississippi Lime and other stacked plays) Eagle Ford Reservoir Source: HPDI Oct 2014, Past 90 Days 5 EPRINC Production Evaluation 20 18 16 14 12 mbd 10 8 Production Production 6 4 2 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 0-25 25-35 35-42 42-50 50+ Source: EPRINC/Ponderosa 6 CAPP’s Canadian Crude Oil Forecast Source: CAPP 2014, “Crude Oil Forecast. Markets, and Transportation” 7 Total Imports, Production, Canadian Imports 12000 U.S. Imports from 10000 Canada of Crude Oil Mbbl/d 8000 U.S. Imports of Crude Oil Mbbl/d 6000 4000 U.S. Field Production of Thousand Thousand per Day Barrels Crude Oil Mbbl/d 2000 Canadian 0 Imports 3 mbd or 40% Source: EIA 8 U.S. Imports from Abroad Steadily Decline 4000 3500 3000 - Impact on prices 2500 as African crude is 2000 pushed 1500 out and now onto Thousand Barrels Per Day ThousandPer Barrels 1000 world market 500 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Africa Middle East South America Europe North America Eurasia 9 U.S. Rig Count 2500 2000 1500 Oil # of # of Rigs 1000 Gas Total 500 0 Source: Baker Hughes 10 Drilling Then and Now Source Rocks Source: From PIECE Course Workbook, Mark J Kaiser, Houston, July 2008, “Introduction to USA Petroleum Industry” 11 Shale Oil Play Production 1,800,000 Permian Basin 1.6 mbd 1,600,000 1,400,000 1,200,000 Eagle Ford 1.4 mbd 1,000,000 800,000 North Dakota 1.13 mbd Barrels Per Day Per Barrels 600,000 400,000 Colorado 216,000 b/d 200,000 Wyoming 213,000 b/d - Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Apr-14 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Eagle Ford North Dakota Permian Basin Wyoming Colorado Source: HPDI Nov 2013, EIA, NDPA 12 Drilling Advances Source: Triangle Petroleum Corporation, Presentation Bakken Product Markets and Take-Away Denver Jan 31-Feb Source: Continental Resources March Investor Presentation, Permission granted 1 2012 13 How is Crude Moved and Why? 14 Transportation Methods of Crude Oil and Petroleum Products Moved from tank storage at the wellhead to refineries via pipeline, truck, rail, barge, or all four methods in combination 15 Why transport crude oil via rail? Source: EPRINC Maps using Hart Energy data and ArcGIS Mapping software 16 How much crude oil does a tank car hold? • One tank car holds about 700 barrels of crude oil (might be more or less depending on design, thickness of tank, heated tank car for bitumen, etc.) • Unit Train = 120 tank cars of one product (scalability to maximize efficiency and reduce cost) = 84,000 barrels • Manifest Train = Less than 100 tank cars, can Source: DOT 111, Wikipedia be multiple commodities, not as economic, but used widely in beginning of crude by rail movement because some refineries and facilities were already equipped to handle manifest train shipments 17 Pipeline vs. Rail Costs • From Bakken to Coasts between $10 - $15 • Slight increases due to fees by railroads for older tank cars and testing fees • From Alberta to Gulf $20 Source: EPRINC Maps using Hart Energy data Source: CAPP 2014 Forecast and ArcGIS Mapping software 18 Role of rail in upstream, midstream, and downstream Source: BNSF Presentation, Sept 2013, via DOT website 19 Infrastructure and Pricing 20 North Dakota Crude Oil Transport January 2012 Estimates March 2014 Estimates Aug 2014 Estimates Source: North Dakota Pipeline Authority 21 July 2014 Williston Basin Crude Transportation Williston Basin Production: 1.2 mbd North Dakota: 1,132,331 b/d South Dakota: 4,675 b/d Eastern Montana: 75,162 b/d Tesoro Refinery: 68,000 b/d Truck to Canadian Pipeline: 8,000 b/d Rail: 766,000 b/d Pipeline: 432,168 b/d Source: NDPA, EPRINC Estimates 22 Source: Barrels Per Day 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 NDPA - Jan-07 May-07 Sep-07 Jan-08 Williston Basin Rail Estimates Williston May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 23 Pipeline Capacity Ample • Plenty of pipeline capacity now, but if more crude should move back to pipe (continued rail concerns regarding Dec regulation uncertainty) could see prices further decline in Clearbrook and in Wyoming Source: EPRINC’s article in Oil and Gas Journal March 2014 24 Source: Aug 2014 HPDI THOUSAND BARRELS PER DAY 100 150 200 250 300 350 400 450 50 0 Jun-09 Aug-09 Oct-09 Dec-09 U.S. Crude Oil Exports…from PADD III Crude PADD Oil Exports…from U.S. Feb-10 Apr-10 U.S. Exports of Crude OilExports U.S. of Crude Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 • • Jun-11 depressing prices depressing further barrels MENA light Canada pushing out eastern to sent and crude Gulf Coast being Bakken to are the U.S. of crude from oil all exports Almost Aug-11 Oct-11 Oil Exports of Crude (PADD Gulf Coast 3) Dec-11 Feb-12 Apr-12 Jun-12 CANADA Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 25 Major Canadian and Shale Oil Crude Flows Source: EPRINC Choke Point Map using Hart ArcGIS Mapping software 26 Pipeline Choke Points Source: EPRINC Choke Point Map using Hart ArcGIS Mapping software 27 No place to go…. Crude disposition by refinery region Source: CAPP Crude Oil Forecast June 2014 28 All Canadian Pipeline Export Options are Full • Kinder Morgan’s Transmountain line off BC coast - currently 300,000 b/d capacity- planned expansion up to 800,000 b/d (early 2017) • (Now Spectra) Platte line to Wood River 280,000 b/d-full • Enbridge mainline system currently transporting over 1.5 mbd with potential capacity around 2.5 mbd— Northern Gateway off BC coast planned 525,000 b/d, several other planned expansions, light oil access +400,000 b/d to eastern U.S. and Canada • TransCanada’s Keystone 581,000 b/d-full—XL would add 700,000 b/d, Energy East Pipeline Project 1.1 mbd Source: Canadian Energy Pipeline Association 29 Canadian Crude by Rail Movements Source: CAPP 2014, “Crude Oil Forecast. Markets, and Transportation” 30 Supply vs. Take-Away Capacity is Risky at Best AT RISK Source: CAPP 2014, “Crude Oil Forecast. Markets, and Transportation” 31 Regional Pricing Disparities Source: Map from AFPM, Flint Hills, EIA, CME Group, and estimates 32 Source: $100.00 $120.00 $140.00 $160.00 EIA, Flint Hills, CME Group,,Flint Bloomberg EIA, Hills, $20.00 $40.00 $60.00 $80.00 $0.00 Jan-08 Apr-08 Light Louisiana Sweet First Purchase Price Purchase First(EIA) SweetPrice Light Louisiana Canadian Select) WCS (Western WTI Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Price Comparison Price Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Brent Hills) Dakota Flint Light (NorthSweet Bakken Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 33 Daily Crude by Rail Shipments in the U.S. and Canada 1,800,000 U.S. Average Barrels Per Day of Petroleum 1,600,000 and Petroleum Product 1,400,000 Canadian Average 1,200,000 Barrels Per Day of Petroleum and 1,000,000 Petroleum Product 800,000 EPRINC's U.S. Daily Barrels Per Day Per Barrels Crude by Rail Estimate 600,000 - 850,000 b/d Oct 2014 400,000 EPRINC's Canada Daily 200,000 Crude by Rail Estimate - 230,000 b/d Oct 2014 0 Jul 13 Jul Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Jul 14 Jul Jan Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Oct Oct 08 Oct 09 Oct 10 Oct 11 Oct 12 Oct 13 Oct 14 Apr Apr 08 Apr 09 Apr 10 Apr 11 Apr 12 Apr 13 Apr 14 Source: AAR; Crude and petroleum product includes liquefied gases, asphalt, fuel oil, lubricating oil, jet fuel, etc.