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Bakken Crude Oil Infrastructure

Brian Hicks

Written By Brian Hicks

Posted February 7, 2013

One consequence of the impressive scope of the North American shale boom has been the revelation of how inadequate existing pipeline infrastructure is. Companies have run in to trouble trying to move all this crude from the Midwest to the rest of the nation.

Thus, in New England, a gallon of gasoline is $3.75 while in the Midwest, it’s $3.55, Businessweek reports. East Coast refiners continue to pay higher prices for the internationally priced Brent crude, imported usually from West Africa, while in the Midwest, it’s possible to buy the cheaper domestic oil, which is priced against West Texas Intermediate and is almost $20 cheaper by the barrel compared to Brent.

But the situation is about the improve this year with the completion of several projects designed to increase the inflow of Bakken oil to the East Coast. East Coast delivery will go from 300,000 barrels per day to more than 800,000.
In Delaware, PBF Energy (NYSE: PBF) stated this week that it has completed work on a rail terminal meant to receive 110,000 barrels per day of Bakken crude.

And just outside Philadelphia, a $68 million project has transformed a defunct coal mine into a rail terminal capable of receiving 80,000 barrels of crude per day.

These two facilities will be able to carry Bakken crude into Delaware City and possibly even all the way into the New York Harbor.

A year ago, Carlyle invested billions to save Sunoco’s 140-year-old refinery in South Philadelphia. That facility can process 330,000 bpd and is presently developing a high-speed rail unloader to transfer oil from trains into the refinery itself. It is also expanding its capacity for Bakken crude processing.

And in January this year, Phillips 66 (NYSE: PSX) reached a five-year agreement with Global Partners, which will see the latter deliver some 50,000 barrels of Bakken crude per day to Phillips 66’s New Jersey refinery.

Clearly, East Coast Bakken refining and processing is surging ahead, benefiting both railroads and refiners. Per Businessweek, oil companies presently face waits of up to nine months for the use of rail cars—such is the burgeoning demand.

But it will take time for any savings to really be transmitted onto the consumer end. A first step toward translating savings across the board would be increased supply, which is presently in the works.


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