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California refiners receiving record crude-by-rail volumes from Canada

02.03.2014  | 

The most populous US state received 709,014 bbl of crude from Canada by rail in December, a 4.9% increase from November and up from zero a year ago, according to the state's Energy Commission.

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By LYNN DOAN and DAN MURTAUGH
Bloomberg

California, the third-largest oil-refining state in the US, is bringing in a record volume of oil from Canada by rail as it faces shrinking supplies from Alaska and within the state.

The most populous US state received 709,014 bbl of crude from Canada by rail in December, a 4.9% increase from November and up from zero a year ago, data posted on the state Energy Commission’s website show. 

Canada made up 67% of the state’s total oil-by-rail receipts. North Dakota, where fields in the Bakken formation are producing a record volume of crude, shrank to a 5.9% share.

US West Coast refiners from Valero Energy to Tesoro, lacking pipeline access to the glut of shale oil in the middle of the country, have been turning to rail to counter declining supplies in California and Alaska. California brought in a record 2.83 million bbl of oil by rail in the fourth quarter from all sources, almost double the amount from the three months prior, the state said.

“We’re seeing a lot of Canadian crude-by-rail loading facilities coming online, so it’s no surprise it’s beginning to show up in California,” said David Hackett, president of energy consulting firm Stillwater Associates in Irvine, California. “Refinery configuration in California is oriented toward heavy or medium, sour crude, and the Canadian barrels, which are heavy and somewhat sour, are a better fit than the light Bakken barrels.”

North Slope

Alaska North Slope crude, which made up 12% of California’s oil slate in 2012, has traded an average $27.73/bbl above Western Canadian Select, a heavy sour blend, over the past month, data compiled by Bloomberg show. Bakken oil has traded $16.09/bbl above Western Canadian.

“The discounts have been pretty big, an indication of how constrained the pipelines are up in Canada,” said Gordon Schremp, a fuels analyst at the state Energy Commission. “I’m not surprised to see more Canadian come in. Wait until some of these rail projects get built here. The economics will be even better than what we’re seeing today.”

Oil-by-rail receipts from Wyoming totaled 221,793 bbl in December, making up the second-largest share of the state’s volume at 21%. North Dakota sent 62,325 bbl and New Mexico 12,927.

Alaskan oil output has declined every year since 2002 as the yield from existing wells shrinks. Alaska North Slope crude production averaged 567,600 bpd in December, down from 582,150 a year earlier, data posted on the Alaska Department of Revenue’s website showed.



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