California Getting Record Volume of Canadian Oil by Rail
January 31, 2014
By Lynn Doan and Dan Murtaugh, Bloomberg.com
The most populous U.S. state received 709,014 barrels of crude from Canada by rail in December, a 4.9 percent increase from November and up from zero a year ago, data posted on the state Energy Commission’s website show. Canada made up 67 percent of the state’s total oil-by-rail receipts. North Dakota, where fields in the Bakken formation are producing a record volume of crude, shrank to a 5.9 percent share.
U.S. West Coast refiners from Valero Energy Corp. (VLO) to Tesoro Corp. (TSO), lacking pipeline access to the glut of shale oil in the middle of the country, have been turning to rail to counter declining supplies in California and Alaska. California brought in a record 2.83 million barrels of oil by rail in the fourth quarter from all sources, almost double the amount from the three months prior, the state said.
“We’re seeing a lot of Canadian crude-by-rail loading facilities coming online, so it’s no surprise it’s beginning to show up in California,” David Hackett, president of energy consulting firm Stillwater Associates in Irvine, California, said by telephone. “Refinery configuration in California is oriented toward heavy or medium, sour crude, and the Canadian barrels, which are heavy and somewhat sour, are a better fit than the light Bakken barrels.”
Alaska North Slope crude, which made up 12 percent of California’s oil slate in 2012, has traded an average $27.73 a barrel above Western Canadian Select, a heavy sour blend, over the past month, data compiled by Bloomberg show. Bakken oil has traded $16.09 a barrel above Western Canadian.
“The discounts have been pretty big, an indication of how constrained the pipelines are up in Canada,” Gordon Schremp, a fuels analyst at the state Energy Commission, said by telephone from Sacramento. “I’m not surprised to see more Canadian come in. Wait until some of these rail projects get built here. The economics will be even better than what we’re seeing today.”
Oil-by-rail receipts from Wyoming totaled 221,793 barrels in December, making up the second-largest share of the state’s volume at 21 percent. North Dakota sent 62,325 barrels and New Mexico 12,927.
Alaskan oil output has declined every year since 2002 as the yield from existing wells shrinks. Alaska North Slope crude production averaged 567,600 barrels a day in December, down from 582,150 a year earlier, data posted on the Alaska Department of Revenue’s website today showed.
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