Houston, 30 August (Argus) — Norway's state-controlled energy company Statoil will start railing Bakken shale crude out of North Dakota at the start of September.
The company said it has more than 1,000 railcars on long-term lease and plans to “upscale” its logistics chain with unit trains, which are essentially entire trains that do nothing but haul crude. Statoil last year bought US independent Brigham Exploration for $4.4bn, gaining Williston basin assets in North Dakota and Montana totaling production of about 21,000 b/d of oil equivalent (boe/d) at that time.
The company did not disclose its crude by rail customers, but said its oil trains could go to the coasts and north to Canada.
Statoil joins a number of Bakken operators and coastal refineries looking at rail as a way to either gain better pricing for their output or price-advantaged feedstock to refine. Pipeline constraints and surging supply have driven Bakken prices to deep discounts to other light sweet crude, spurring a boom in rail transport that has boosted the bottomlines of railroads and spurred a build-out of infrastructure.
Rail terminals have sprung up across the state. In April, 39pc of North Dakota's Williston basin crude output left by rail, and even more terminals have gone into service this summer.
The trend looks likely to continue. A number of refineries and midstream firms have announced plans to build receiving rail terminals or otherwise take railed crude at the coasts. Tesoro plans to take Bakken west all the way to its Washington state and California refineries. PBF recently did an about-face, saying it would ramp up Bakken crude via rail to its Delaware refinery on the Atlantic coast after initially dismissing the idea as too expensive.
Some rail terminals already exist in places like Albany, New York, St James, Louisiana, and Port Arthur, Texas. JP Morgan analysts this week said they expect key crude spreads to become increasingly tied to the cost of rail and the demand for railed crude from US coastal refineries.
“The rail solution supporting the Bakken business will increase the value of the oil significantly. This translates to substantial profits as production continues to grow,” Torstein Hole, senior vice-president for Statoil's US onshore division, said.
The company aims to boost its North American production from under 100,000 boe/d last year to more than 500,000 boe/d in 2020.
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