North Dakota’s largest customer for crude oil, a Pennsylvania refining complex, will soon be processing 190,000 barrels per day of light, sweet crude from the Bakken petroleum system, 160,000 bpd of which will be delivered by rail and 30,000 by barge.
The refiner, Philadelphia Energy Solutions, or PES, held a ribbon cutting ceremony Oct. 2 celebrating the completion of phase 3 of its rail unloading terminal upgrade, which involved a high-speed unloader to move oil from the rail cars.
“There are a couple of little tweaks we’re working out, but we expect to be fully operational very soon,” PES public affairs and communications manager Cherice Corley told Petroleum News Bakken Oct. 8.
Phase 1, completed in April, allowed the refiner to take three unit trains per week; phase 2, finished in July, increased that to five unit trains a week; phase 3, which was the completion of the North Yard Rail Terminal and involved 5.6 miles of track on PES’ site, allows the refiner to accept two unit trains per day, seven days a week. Each train has 120 cars and holds 80,000 barrels of oil.
“Once our rail yard is fully operational, our plan is to take half of our supply (330,000 bpd average) by rail from North Dakota,” Corley said.
Williston Basin producer Statoil, she said, was a “regular supplier of Bakken crude” to PES.
According to North Dakota Industrial Commission records, Statoil operated wells that produced an average of 51,545 barrels of oil per day in July, the most recent month released by the state. This number excludes all production from wells on confidential status.
At the ribbon cutting ceremony, which was attended and reported on by Reuters’ reporter Sabina Zawadzki, PES CEO Philip Rinaldi said the company’s investment in the rail project was to give the refiner increased access to lower-cost domestic crude supplies, including the Bakken, Texas’ Permian Basin and Ohio’s Utica shale play.
Bakken economics here to stay
“So, right now crude from the Bakken and North Dakota is a very good thing but, you know what, times change, and if the better crude starts moving down to the Utica, we can take it by rail. If it’s in the Permian Basin, we can take it by rail. So we’re connected everywhere and we don’t get locked in,” Rinaldi was quoted as saying in an Oct. 2 Reuters report.
When asked whether a diminishing spread between U.S. and Brent crude oil futures could make Bakken crude less attractive, Rinaldi said that while the spread was an important indicator, “it really doesn’t drive” the economics of the Bakken.
He said with a daily oil production of 850,000 bpd, North Dakota “crude has got to get to the market and the only really meaningful way it will get to the market is by rail. ... We will be by far the largest consumer of Bakken crude oil. I think those economics will stay because they’re necessary to clear that area.”
PES was formed in 2012 as a partnership between The Carlyle Group and Sunoco Inc., which is a subsidiary of the Energy Transfer Partners L.P. family of companies.
PES separated the combined refineries into separate business units and operates as a refining complex made up of the two domestic Pennsylvania refineries — Girard Point and Point Breeze.
It is the largest oil refining complex on the U.S. Eastern seaboard.
