California, home to two-thirds of refining capacity in the western U.S., brought in a record volume of waxy oil by rail from Utah in June as crude imports from Canada and North Dakota slid.
The state, the biggest gasoline market in the U.S., received 2,737 barrels a day of oil by rail from Utah in June, almost twice the volume of the previous month and up from nothing a year ago, data on the state Energy Commission’s website showed Aug. 5. Canadian oil-by-rail imports dropped 25% to 6,669 barrels a day. North Dakota shipments shrank by 34% to 4,035.
California’s oil-by-rail deliveries are at a seasonal record as refiners in the western U.S., lacking direct pipeline access, use trains to reach surging crude production from shale formations in the center of the country and in Canada. Utah is shipping record volumes of oil by rail as companies use a combination of hydraulic fracturing and horizontal drilling to draw the most waxy oil out of its Uinta Basin since 1987.
Ultra Petroleum Inc., a Houston-based independent oil and gas driller that bought $650 million worth of oil-producing assets in the Uinta Basin in northeast Utah last year, said July 31 that “rail capacity is the best option to place our barrels.”
“By 2016, we expect to market approximately 45% of our crude oil volumes via rail,” Garland Shaw, the company’s chief financial officer, said in a conference call with analysts. The company has agreements for at least 2,000 barrels a day of rail capacity that can expand to 7,500, he said.
Rail shipments still account for a small fraction of oil supplies in the western U.S. In May, the region took 1.1 million barrels of crude a day from outside the U.S., according to data compiled by the Energy Information Administration, the Energy Department’s statistical arm.
Demand for Uinta Basin oil may be limited by California refiners’ ability to receive and process the black, waxy oil, David Hackett, president of energy consulting firm Stillwater Associates in Irvine, Calif., said by telephone yesterday.
“It’s hard to place because of its high pour point,” he said. “They don’t call it black wax for nothing. At room temperature, it’s a candle.”
Recommended Reading
How Chevron’s Anchor Took on the ‘Elephant’ in the GoM’s Deepwater
2024-08-22 - First oil at Chevron's deepwater Anchor project is a major technological milestone in a wider industry effort to tap giant, ultra-high-pressure, high-temperature reservoirs in the Gulf of Mexico.
E&P Highlights: Aug. 19, 2024
2024-08-19 - Here’s a roundup of the latest E&P headlines including new seismic solutions being deployed and space exploration intersecting with oil and gas.
E&P Highlights: Sept. 16, 2024
2024-09-16 - Here’s a roundup of the latest E&P headlines, with an update on Hurricane Francine and a major contract between Saipem and QatarEnergy.
The EPC Market Keeps Its Head Above Water
2024-08-06 - While offshore investments are rising, particularly in deepwater fields, challenges persist due to project delays and inflation, according to Westwood analysis.
Kosmos’ Stars Shine Bright in 2Q
2024-08-08 - With the startups of Jubilee Southeast and Winterfell, Kosmos Energy is halfway to achieving its production goal.