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 Instead, shale production from North Dakota has been shrinking and
those refiners have resumed buying imported crude. The 140,000
barrel-per-day rail terminal at Yorktown, Virginia has been sitting
idle, according to two sources familiar with its operations.
The most recent weekly report from energy industry intelligence
service Genscape reported no traffic at the facility, which the
sources said was expected to remain dormant through next month.
Refiners have been booking an armada of vessels to carry North Sea
and West African crude to U.S. shores, the biggest import binge in
years that will all but displace Bakken shale.
Spot shipments of crude by rail have all but vanished. Rail car
lease rates have slumped to half what they were a year ago and
oil-by-rail traffic has dropped 17 percent in the first few weeks of
2016, according to the latest data from the Association of American
Railroads. [L2N1541M9]
Rail car traffic at the Eddystone rail facility outside
Philadelphia, a joint venture between a local group and Enbridge [ENBR.UL],
is expected to be the lowest in years, according to two sources
familiar with that facility’s operations.
The terminal typically unloads about 27 unit trains a month, or
roughly 65,000 barrels per day (bpd). But its main customer, the
refining subsidiary of Delta Airlines Inc., has turned to oil from
Gabon and Nigeria, the sources said.
Monroe Energy, the subsidiary, is cutting back "big time" on rail,
one of the sources said, adding that the only Bakken still coming
into the region is connected to term deals. FerrelGas Partners has
an agreement to supply Monroe Energy with 65,000 bpd of crude oil at
the Eddystone facility.
But Plains has no long-term contract with any customer for its
Yorktown facility, multiple industry sources said. At the time of
the purchase, they said, the risk seemed justified, as refiners like
Monroe and Philadelphia Energy Solutions bought spot barrels through
the facility.
Plains has also shut down its 65,000 bpd Manitou rail terminal in
North Dakota, a trading source said, and is seeing very little
activity at its nearby Van Hook facility. The facilities loaded
trains headed to the Yorktown location.
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Plains did not respond to calls and emails seeking comment.
Last May, U.S. Energy Information Administration data shows,
oil-by-rail volumes peaked on the East Coast, with the region
receiving some 472,000 bpd of crude that way, enough to fill about
40 percent of the region's refining capacity. By October, the latest
data available, that rate had already fallen to 415,000 bpd.
OFF THE RAILS
Crashing oil prices and the end in December of a four-decade U.S.
crude export ban have whipsawed the economics for East Coast
refiners, pushing them back to imported crude just a few years after
foreswearing it in favor of domestic shale.
This has hammered the oil-by-rail industry. Customers stuck with
deliveries of rail cars they no longer need have chosen to put them
in storage instead of in service.
Refiner PBF Energy, which announced in an October earnings call that
it was relying almost exclusively on foreign crudes at its two East
Coast plants, has begun using some idle tank cars to take deliveries
of feedstock for its gasoline unit, according to a source familiar
with the plant's operations.
Current monthly lease rates for the newest, safest tank cars have
slid to roughly $700 from $1,300 early last year and as high as
$2,450 in 2014, according to Tom Williamson, owner of Transportation
Consultants.
The older model tank cars, Williamson said, are going for as low as
$300 a month. At those prices, the lease payments are not enough to
cover the cost of building the cars, Williamson said.
"It's not rock bottom, but it's pretty close," he said.
(Reporting By Jarrett Renshaw)
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