More oil companies are being drawn to explore, develop, and produce crude oil in the Bakken formation in North Dakota and Montana only to discover limited pipeline takeaway capacity exists for transporting their oil to market.
EOG Resources Inc. decided to move oil by railroad upon realizing anticipated production would exceed pipeline capacity. Enbridge's North Dakota System, was the only pipeline available. EOG executives arranged with BNSF Railway for up to one unit train/day with a capacity of 60,000 bbl of oil.
The first train to transport EOG oil departed from Stanley, ND, on Dec. 31, 2009, for its 4-day trip to Stroud, Okla., which is halfway between Tulsa and Oklahoma City. On Apr. 7, EOG said it was using two trains/week so far as it ramps up production.
From Stroud, the oil is shipped via a 17-mile pipeline to a terminal in Cushing, Okla. EOG last year constructed the pipeline from Stroud to Cushing and also built loading facilities in Stanley and the unloading facilities in Stroud.
Transportation logistics
"The project is an example of EOG's agility, its ability to make decisions quickly, and to implement solutions to resolve issues that might stymie other operators," Mark G. Papa, EOG chairman and chief executive officer, said in a Feb. 25 letter to stockholders.
The rail option was expected to improve the economics compared with shipping the oil by pipeline to a Clearbrook, Minn., hub. Previously, EOG moved Bakken oil by truck to markets in Salt Lake City and Cushing, but that option was uneconomic, Papa told analysts last year.
EOG expects its Bakken production will grow for many years as the company boosts its US and Canadian liquids production with horizontal drilling, Papa said. As EOG further evaluates its Bakken transportation needs and the business plan, it might agree to take third-party oil to fill rail shipments, he said.
On Jan. 5, Enbridge Energy Partners LP announced completion of an expansion of its North Dakota crude oil system, bringing its nominal capacity to 161,000 b/d.
NuStar using rail
NuStar Energy LP, a publicly traded limited partnership based in San Antonio, on Apr. 16 announced it started using rail on a manifest basis to move Bakken oil from North Dakota to a terminal in St. James, La.
A spokeswoman said NuStar is working with UP, BNSF, and CP to ship up to 10,000 b/d. NuStar's long-range plan is to use a unit train to ship crude to St. James.
NuStar operates crude oil and refined product pipelines and terminals that store and distribute crude oil, refined products, and specialty liquids. It has two asphalt plants.
Elsewhere, Canadian National Railway suggests it could move production from Alberta oil sands operations to market faster and cheaper than pipelines.
CN says it can ship oil sands production via existing rail from Alberta to the US Gulf Coast in 8 days compared with the 50 days that it would take to ship the oil via pipeline.
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