Tag Archives: Oil prices

Crude By Rail, Empty tank cars, Federal Regulation (U.S.), Freedom of Information Act (FOIA), Hazardous cargo transparency, High Hazard Flammable Trains (HHFTs), North American light crude oils, Oil prices, Open-records request, Parked trains, Rail industry, Residue train

Held up in court for a year, Maryland oil train reports outdated

Repost from McClatchyDC

Held up in court for a year, Maryland oil train reports outdated

By Curtis Tate, September 12, 2015

HIGHLIGHTS
•  McClatchy received reports it asked for in 2014
•  Documents contained data previously revealed
•  Economics of crude by rail have shifted since

After more than a year, McClatchy finally got the oil train reports it had requested from Maryland.

And they were badly out of date.

Last year, McClatchy filed open-records requests in about 30 states for the documents, and was the first news organization to do so in Maryland, in June 2014.

Maryland was poised to release the records in July 2014, when two railroads, CSX and Norfolk Southern, sued the state Department of the Environment to block the disclosure.

Finally last month, a state judge ruled in the favor of the release, marking the first time a court had affirmed what many other states had already done without getting sued.

The documents McClatchy and other news organizations ultimately received were dated June 2014, not long after the U.S. Department of Transportation began requiring the railroads to notify state officials of shipments of 1 million gallons or more of Bakken crude oil.

After more than a year, however, the economics of shipping crude by rail had changed substantially.

Amid a slump in oil prices, refineries once receiving multiple trainloads of North American crude oil every day have switched, at least temporarily, to waterborne foreign imports.

The trend is reflected from the East Coast to the West Coast, where long strings of surplus tank cars have been parked on lightly used rail lines, generating rental income for small railroads but also the ire of nearby residents.

The documents released in Maryland show that in June 2014, Norfolk Southern was moving as many as 16 oil trains a week through Cecil County on its way to a refinery in Delaware.

But McClatchy has known that since August 2014, when it received a response to a Freedom of Information Act request from Amtrak.

The Delaware News Journal reported that the PBF Refinery in Delaware City, Del., now receives only about 40,000 barrels a day of crude by rail. That’s about 56 loaded tank cars, or half a unit train, nowhere close to the volume of mid-2014.

The June 2014 Maryland documents also show that CSX was moving as many as five oil trains a week on a route from western Maryland through downtown Baltimore toward refineries in Philadelphia.

But that had been clear since at least October 2014, when the Pennsylvania Emergency Management Agency released its oil train reports showing an identical number of CSX trains crossing from western Pennsylvania into Maryland, then back into southeast Pennsylvania.

CSX told the Baltimore Sun that it had not regularly moved a loaded oil train through Baltimore since the third quarter of 2014. The company had earlier told the newspaper that it moved empty oil trains through the city and state.

Federal regulators never required railroads to report empty oil train movements.

The vast majority of loaded CSX oil trains move to Philadelphia via Cleveland, Buffalo, Albany, N.Y., and northern New Jersey, according to records from Ohio, Pennsylvania and New York.

Bakken Crude, Crude By Rail, Oil Industry, Oil prices, Oil refineries

Does zero Bakken crude for Irving Oil indicate a trend?

Repost from Railway Age
[Reference:  see the 8/20/15 Wall Street Journal article, Canada’s Largest Refinery Shifts from Bakken Shale Oil to Brent Crudes.  – RS]

Does zero Bakken crude for Irving Oil indicate a trend?

By  William C. Vantuono, Editor-in-Chief, August 28, 2015
Irving Oil Ltd. Saint John, N.B. refinery
Irving Oil Ltd. Saint John, N.B. refinery

Irving Oil Ltd., operator of Canada’s largest crude oil refinery, has stopped importing crude oil sourced from the Bakken shale formation in North Dakota and shipped by rail in favor of cheaper crudes from such producers as OPEC, “reflecting a shift in crude costs affecting East Coast refiners during a global slump in oil prices,” the Wall Street Journal recently reported.

The 320,000-barrel-a-day refinery in Saint John, N.B., one of the biggest by volume in North America, had been receiving 100,000 barrels a day by rail, a high reached two years ago that was only temporarily affected by the Lac Mégantic disaster. (The Montreal, Maine & Atlantic crude oil train that derailed on July 6, 2013, claiming 47 lives, was bound for the refinery). Today, CBR shipments the refinery are zero, a move “that reflects shifting economics in the energy industry even as the price of oil—including Bakken crude—has slumped to six-year lows,” said the WSJ. “About 90% of the crude oil Irving currently buys is shipped by sea from such producers as Saudi Arabia and those in western Africa, with the remainder coming by rail from such western Canadian oil-sands operators as Syncrude Canada Ltd. and Royal Dutch Shell PLC. A year ago, Bakken crude made up about 25% of Irving’s feedstock and in 2013 it supplied nearly one-third of its procurement volume, or about 100,000 barrels a day. ‘The Bakken price has gone up’ relative to other crudes when CBR costs are factored in,’ [an Irving Oil executive] said.”

“A once-yawning gap, between the cost of oil produced in North America and overseas crudes priced at the Brent global benchmark, has narrowed since 2013,” the WSJ noted. “Refiners on North America’s east coast can now import crude shipped by sea for less than the cost of shipping it by rail from shale oil producers in North Dakota and elsewhere in the U.S.”

Production of U.S. shale oil, especially that from the Bakken, led to CBR shipments increasing exponentially due to a lack of pipelines. CBR is more expensive than by shipping by pipeline and even by ship, and fewer refiners are willing to pay a premium for CBR. <p< Whether Irving Oil’s decision to abandon Bakken crude for a single refinery reflects a broader trend that will affect CBR movements remains to be seen. Two other refiners have followed suit, but the situation may not be permanent.

“Refiners PBF Energy Inc. and Phillips 66 both said they increased procurement of overseas crudes at the expense of CBR in the second quarter, though they signaled it is unclear if that will continue throughout the rest of the year,” the WSJ reported. “‘Our ability to source sovereign waterborne crudes was far more economic to the East Coast facilities, and that’s what we did,’ PBF Energy CEO Tom Nimbley said in late July. Phillips 66 CEO and Chairman Greg Garland told investors last month, ‘We actually set [crude-by-rail] cars on the siding. We brought imported crudes in the system.’ But, he added, ‘I’d say given where our expectations are for the third quarter, I’d say cars are coming off the sidings, and we’re going to import less crude.’”

CBR traffic has dropped substantially compared to last year, “reflecting both the worsening economics of CBR and better pipeline access to refineries on the Gulf of Mexico,” the WSJ noted. According to Association of American Railroads figures, U.S. Class I railroads originated 111,068 carloads of crude oil in the second quarter of 2015, down 2,201 carloads from the first quarter and some 21,000 fewer carloads than the peak in 2014’s third quarter.

 

Bankruptcy, Offshore drilling, Oil prices, Oil producers

Oil bust claims first casualties – Hercules Offshore

Repost from MySanAntonio.com

Hercules Offshore files bankruptcy with plan to convert debt

By Bloomberg, August 13, 2015
Several Texas oil and gas producers have either filed for Chapter 11 bankruptcy protection or have missed interest payments and are heading toward restructuring.
Several Texas oil and gas producers have either filed for Chapter 11 bankruptcy protection or have missed interest payments and are heading toward restructuring. Photo: James Durbin

Hercules Offshore Inc., owner of the largest fleet of shallow-water drilling rigs in the Gulf of Mexico, filed for bankruptcy with a plan to be taken over by senior creditors.

The company said it planned to use the bankruptcy process to implement a proposal, announced in July, to cut $1.2 billion in debt. The plan calls for investors to trade their senior notes for almost 97 percent of Hercules’s equity.

Some noteholders would also lend the company $450 million to help finish building a new oil-drilling rig, the company said in a statement.

Under the plan, current shareholders would have a chance to split the 3 percent of the company not going to noteholders, Hercules said. The plan must be approved by a bankruptcy judge in Wilmington, Delaware, where the case was filed Thursday.

Hercules, which leases rigs to oil and gas producers, said the plan has the “overwhelming” support of the noteholders.

The Houston-based company, formed in 2004 as a small gulf driller, has a fleet of 27 jack-up rigs and 21 lift boats.

Flagging Demand

Demand for both U.S. and international business has flagged as the price of oil has plunged. Drillers around the world have also been suffering from a glut of new sophisticated vessels displacing older rigs in the market. Cal Dive International Inc., a contractor that does manned diving and platform installation, sought creditor protection in March.

Debt issues by Hercules and fellow Houston-based drilling rig provider Paragon Offshore were among the worst-performing oil and gas service bonds in the high-yield energy index in the first quarter of 2015, according to Bloomberg Intelligence analysts Spencer Cutter and Yuanliang Huang.

The number of rigs operating in the U.S. Gulf of Mexico has fallen by more than half from last year’s high of 63 in August, according to Baker Hughes Inc.

Hercules listed liabilities of $1.3 billion and $546 million in assets as of Aug. 11.

The case is In re Hercules Offshore Inc., 15-11685, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Bakken Crude, Crude By Rail, Derailment, Federal Regulation (U.S.), Iranian oil, Oil exports, Oil imports, Oil prices

Iran agreement could spell end to limits on U.S. oil imports

Repost from Minuteman News, New Haven, CT

Iran agreement could spell end to limits on U.S. oil imports

By Emily Schwartz Greco,  July 29, 2015

What a relief. In exchange for Iran taking steps to guarantee that it can’t build nuclear weapons, the sanctions that have choked off its access to world markets will end without a single shot.

Instead of celebrating this diplomatic breakthrough, conservative lawmakers are plotting to scuttle the pact. And despite their opposition, some Republicans are milking this accord for a pet project: ending all limits on U.S. crude sales.

“Any deal that lifts sanctions on Iranian oil will disadvantage American companies unless we lift the antiquated ban on our own oil exports,” Alaska Senator Lisa Murkowski declared a few weeks back.

It’s an enticing argument. Why should Washington help Iran freely sell its oil while denying the U.S. industry the same liberty?

Well, the ban is already punctured. The United States, which imports 7 million barrels a day of crude, also exports half a million barrels of it every 24 hours.

And most of that oil goes straight to Canada by rail or gets hauled to ports by trains after getting extracted from North Dakota’s landlocked Bakken fields.

Remember that oil train that derailed two years ago in the Quebec town of Lac Megantic, unleashing an inferno that burned for four days and killed 47 people? It was ferrying exported Bakken crude.

Smaller accidents are happening too. Most recently, an oil train derailed near the tiny town of Culbertson, Montana, spilling thousands of gallons of oil from North Dakota.

Ramping up exports would only boost the chances of a major disaster, Oil Change International Executive Director Steve Kretzmann says.

That’s why the restrictions, imposed by Congress during Gerald Ford’s presidency to boost energy independence, should remain unless the government creates better safeguards.

Besides, Iranian oil sales won’t begin bouncing back until early next year at the soonest as diplomats must first verify compliance with nuclear obligations. But there’s no doubt that more crude will eventually gush from that Middle Eastern country.

Prior to the 1979 revolution that brought a theocratic government to power, Iran was exporting 6 million barrels a day — quadruple current levels. By 2008, amid lighter sanctions, it was only shipping 3 million barrels a day overseas. Seven years later, that figure has been halved again.

Iran’s got between 30 and 37 million barrels stored and ready to sell before it even re-starts wells that were shut down when sanctions tightened. As Iran sits atop some 158 billion barrels of oil, the world’s fourth-largest reserves, its potential is huge.

Will American companies, which can freely export value-added oil products like gasoline, lose out if they can’t ship more crude overseas? Not really.

Money spent beefing up infrastructure could be wasted if Iran dislodges new markets. Nixing export restrictions could boost production by half a million barrels daily, but many North American wells won’t make financial sense if the Iran gusher adds to the global glut responsible for slashing oil prices over the past 12 months.

Goldman Sachs analysts expect U.S. oil prices to hover around today’s $50-a-barrel mark for at least another year. If they’re right, many North Dakota and Texas fracking sites won’t be viable anyway.

And why are prices slumping? Domestic output has nearly doubled under President Barack Obama’s leadership to 9.7 million barrels a day. The United States now drills more oil than Saudi Arabia despite the White House’s calls for climate action.

While the leaky ban does chip away at U.S. prices, it’s not as if the Obama years have been a bust for oilmen.

And regardless of whether the industry gets the freedom Murkowski seeks, the United States, Iran, and the rest of the world must figure out how to get by on less oil.

Columnist Emily Schwartz Greco is the managing editor of OtherWords, a non-profit national editorial service run by the Institute for Policy Studies.