Working on the railroads

The rapid increase of North American crude production has resulted in pipeline bottlenecks in some areas, forcing more reliance on rail transportation to access some of the highest-value markets, said analysts with PIRA Energy Group in New York.

US President Barack Obama in his second inaugural speech called for a $50 billion upgrade of the US transportation infrastructure, including rail, that political analysts say will be hard to finance. Now PIRA Energy analysts have partnered with Transportation Economics LLC of Lebanon, Pa., for a multiclient study of the growing need to transport crude by rail from producing regions with limited pipeline capacity to refining centers in North America. They said, “Since wellhead prices are significantly influenced by a netback of the marginal barrel produced, and rail supply chain costs are typically much higher than pipeline costs, in many cases the cost of delivering the crude via rail is a crucial determinant of wellhead crude prices in these landlocked regions relative to crude prices in coastal markets.”

The rapidly growing need for more rail transportation of crude has triggered sizeable investments in both loading and unloading facilities and soaring orders for tank cars “making movement of oil by rail a major growth market for North American railroads,” PIRA Energy consultants reported. This calls for “a better understanding of the many specific logistical challenges that are raising key questions around the movement of crude from field to refinery, with particular emphasis on whether there will be adequate rail and barge capacity and if the current tight market for rail cars will loosen.”

Peter Jaquette at PIRA, one of the authors of the study, said, “The supply chain for moving crude oil by rail in North America is complex, involving trucking in the field, storage and loading, railroad line haul, tank car expense, unloading, and potentially barging to the final destination. While the entire supply chain cost is often referred to as the ‘railroad’ transportation cost, the direct railroad line haul portion may be less than 40% of the total cost. Each of the cost components has individual market dynamics.”

PIRA analysts report the cost of some of these supply chain links will jump almost 30% in the next 5 years while the cost of others will decline 10%. “This is why we are doing the study: to provide a deeper understanding of each of the cost components of moving crude oil by rail,” Jaquette said. The study is scheduled for publication in early April.

Weather and energy

Meanwhile, a separate study by the federal National Climate Assessment and Development Advisory Committee reached the obvious conclusion transportation of oil, coal, and electricity “is vulnerable to extreme weather events.” So are natural gas and LPGs, of course.

Not everyone subscribes to the committee’s politically correct conclusion in its report draft that climate change is already affecting “the frequency, intensity, and length of many extreme weather events” and will only get progressively worse, “particularly heat waves, wildfire, flooding, longer and more intense drought, heavy precipitation in winter storms, and extreme coastal high water due to storm events and sea level rise.”

Their fear the concentration of refineries and offshore production along the Texas and Louisiana Gulf Coasts is particularly vulnerable to hurricanes is easily resolved: extend production and refining along the Eastern Gulf Coast, the East Coast, and the West Coast. Even another Hurricane Katrina couldn’t hit it all.

Still the committee pointed out one pertinent fact. Rail lines, which already carry coal to power plants and are carrying more oil to refiners, often follow riverbeds. Intense rainstorms—whether more or less in number and volume as climate change advocates suggest—can lead to flooding “that degrades or washes out nearby railroads and roadbeds.”

The committee projects energy demand for cooling will increase in the Pacific Northwest over the next century from increased use of air conditioners because of global warming and population growth—no doubt augmented by refugees from coastline flooding. The committee said average sea level around the world is to rise 1-4 ft by 1921, but a projection of 6½-ft increase “may be useful for decision makers with a low tolerance for risk.”

Perhaps public demand for oil and gas drilling off the East Coast also will increase by then.

(Online Feb. 26, 2013; author's e-mail: samf@ogjonline.com)

Related Articles

Energy consumption to escalate

07/30/2013 World energy consumption will jump 56% in the next 30 years, driven by growing demand in developing countries, the US Energy Information Administra...

US, Mexico energy trade in flux

05/28/2013 Energy trade between the US and Mexico is in flux with rising crude production in the US, falling production in Mexico, and rising Mexican demand f...

Foreign crude supply concentrated

04/29/2013 It’s no secret the jump in US oil production in recent years has dropped imports of foreign crude to the lowest It’s levels since 1997—down 1.3 mil...

Corn, ethanol prices squeeze profit

03/25/2013 Last summer, US prices for ethanol and corn reached such an imbalance that production costs exceeded revenue at relatively simple ethanol plants, t...

War, weather issues affect energy

01/28/2013 The fatal 4-day siege at the In Amenas gas production plant in eastern Algeria near the Libyan border that left 81 people dead “heightens concerns ...

2013 looks a lot like 2012

12/31/2012 New Year 2013 looks as though it will be much like the old one. There’s rioting in Egypt, confrontation with Iran, continued crisis in the Euro-zon...

Political crisis weighs on oil

11/26/2012 On Nov. 21, Egyptian officials announced a ceasefire agreement—which they helped broker—between Israel and Hamas leaders to end a week of fighting.

Storms, oil, and elections

10/29/2012 Hurricane Sandy was bearing down on the East Coast on Oct. 29, disrupting oil supplies, energy demand, and early voting in the last full week befor...

Oil prices roiled by data

09/24/2012 Oil prices fluctuated widely in mid-September as analysts and traders tried daily to interpret market indicators from a flood of economic data. The...

White Papers

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Available Webcasts



The Future of US Refining

When Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST



On Demand

Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST


Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected