PBF Energy Inc. (PBF:US) finished construction of the second train unloading terminal at its Delaware City refinery, boosting total crude-by-rail capacity to 110,000 barrels a day.
PBF expects to unload its first unit train of Bakken oil this week, with 17 more scheduled to arrive in the next two weeks, the company said today in a statement. The 182,200- barrel-a-day refinery can take 40,000 barrels a day of heavy crude by rail and 70,000 barrels of light.
PBF, based in Parsippany, New Jersey, is trying to tap into the glut of oil stranded in Canada and the U.S. Midwest as production growth has outpaced pipeline capacity, depressing prices relative to Brent, the benchmark crude for Atlantic refiners.
“The completion of this premier rail facility puts our East Coast refining system at a competitive advantage compared to its Atlantic Basin peers,” Chief Executive Officer Tom Nimbley said in the statement. “PBF is now able to deliver significant quantities of cost-advantaged North American crude oils directly to Delaware City at very competitive pricing.”
By building unloading capacity directly at the refinery, PBF saves about $3 a barrel compared with deals where rail is transported by a combination of rail and barge, Nimbley said Jan. 24 at the Argus Crude Americas Conference in Houston.
The company said it’s spending $50 million to double its heavy crude unloading capacity at Delaware City by the end of the year. Nimbley said at the Argus conference that he expects to see “explosive growth” in moving crude by rail out of Canada this year.
“The Bakken was faster on building rail infrastructure than the Canadians,” he said. “They were thinking (Keystone) XL was going to get done, they were thinking they’d have that to move it, now they’re saying ’Oh my what has happened?’”
TransCanada Corp. (TRP) is awaiting approval from the State Department for a portion of the Keystone XL pipeline which would run from Alberta to Steele City, Nebraska. The company broke its $7.6 billion Keystone XL pipeline into two projects after President Barack Obama rejected a permit application last year over environmental concerns in Nebraska.
The Calgary-based company anticipates completing a segment of the pipeline that will run from Oklahoma to Texas refineries by the end of 2013, Chief Executive Officer Russ Girling said at a conference last month.
PBF spends about $17 a barrel transporting heavy Canadian, Nimbley said. The extra cost compared with Bakken is because heavy Canadian oil needs to be transported in coiled and insulated rail cars, which carry about 550 barrels per car, compared with 700 for Bakken oil.
PBF also said in the statement that it will purchase 2,000 more coiled and insulated rail cars to transport Canadian crude, and 500 more general purpose rail cars. The company will own or lease 3,600 cars designed for heavy crude by the first quarter of 2015, when delivery of the order is complete.
Bakken crude priced at Clearbrook, Minnesota, cost $21 a barrel less than Brent, the benchmark for Atlantic Coast refiners, at 9:02 a.m. New York time, according to data compiled by Bloomberg. Western Canada Select, a blend of heavy sour oil from Alberta, cost a record $65.81 a barrel less than Brent on Dec. 14. The crude traded at a discount of $49.19 today.
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