A Tesoro Corp. rail project in Washington will likely impact Alaska oil markets.
A subsidiary of the refining company launched a joint venture in April with Savage Companies to build a 120,000-barrel per day crude-by-rail unloading and marine loading facility at the Port of Vancouver. The facility could theoretically supply crude oil to Alaska, but could also increase the competitiveness of Bakken crude against Alaska North Slope supplies, CEO Gregory J. Goff said during a recent earnings call.
The Port of Vancouver facility will have “a lot of flexibility and capability to take different types of crudes, from heavy Canadian crudes to crudes from the Mid-Continent… So we will source crude from where the best place is,” Goff said on Aug. 2. “The facility also was designed to supply the entire West Coast… We can go from as far away as Alaska to Southern California, in those refineries, which we intend to do.”
Tesoro previously built a rail unloading facility at its Anacortes, Wash. refinery to accommodate mid-continent crude supplies, such as those from the Bakken region. The Anacortes refinery has historically been the market for Alaska North Slope crude.
Asked whether Tesoro saw an “ANS Bakken level,” where transporting Bakken crude by rail “doesn’t work,” Goff provided two figures. He said Bakken crude maintains a $3 to $5 per barrel “upgrade value” to Alaska North Slope crude, but Tesoro typically spends some $9 per barrel to get Bakken crude to the Pacific Northwest. Those costs should be “slightly less” to get to the Port of Vancouver facility, but still provide a spread, he said.
In addition to the Port of Vancouver project, Tesoro recently purchased the 266,000 bpd Carson refinery in Southern California from BP. As Tesoro begins changing out the crude supplies to the facility, it could also have an impact of Alaska crude oil. “It is our intent to make a tremendous focus on how we supply crude oil to the refinery and gain crude advantage there, so we are doing everything we can to be able to do that,” Goff said.
Alaska throughput upTesoro handled 146,000 barrels per day from its northwest operations in Alaska and Washington in the second quarter, up from 143,000 bpd in the second quarter of 2012.
The increase is partially the result of a 2012 turnaround in Alaska.
The unit reported a gross refining margin of $172 million ($12.92 per barrel) in the second quarter, down from $280 million ($21.64 per barrel) over second quarter 2012.
Gross manufacturing costs rose to $4.30 per barrel from $4.02 per barrel year over year.