D1 1530 Steve Magness - Crude By Rail | Downstream Infrastructure
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Longevity of Crude by Rail An Analy5cal Framework Steve Magness Upgrading Crude by Rail Capacity 2013 February 26B27 Houston, Texas
Transcript of D1 1530 Steve Magness - Crude By Rail | Downstream Infrastructure
Longevity*of*Crude*by*Rail*An*Analy5cal*Framework!
Steve!Magness!
Upgrading*Crude*by*Rail*Capacity*2013*
February*26B27*
Houston,*Texas*
Crude*by*Rail*Value*Chain*and*Issues**
• Trucking!or!pipeline!gathering!systems!from!the!lease!
• Rail!loading!and!discharge!facili:es!
– Design;!manifest/unit!train,!ladder/loop!tracks,!speed!and!safety!
– Loca:on!and!connec:vity;!pipelines,!barges,!vessels,!refinery!direct!– Product!storage;!mul:ple!quali:es!
– Track!design!and!railcar!storage!• Rail!cars!
– Scheduling,!fleet!sizing!and!fleet!management!
– Availability!• Railroads!
– Service!design!and!execu:on;!systemHwide!and!local!
– Access!to!des:na:ons!– Rates!– Commitment!
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Tight*Oil*and*Des5na5on*Markets*The*Where*is*not*the*issue*but*How*Much*
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Padd!1!
8/11!Refineries!
1!million!bbls/day!
75mb/day!coking!
Padd!2!
25/27!Refineries!
3.6!million!bbls/day!
400mb/day!coking!
Padd!3!
54/57!Refineries!
8.5!million!bbls/day!
1.4!million!bbls/day!coking!
Padd!4!
17!Refineries!
600mb/day!
82mb/day!coking!
Padd!5!
30/32!Refineries!
3!million!bbls/day!
200mb/day!coking!
Eastern!Canada!
600mb/day!
Crude*Producer’s*Key*Focus*
• Producers*Seek:*– Logical!markets;!best!netbacks!
– Infrastructure!to!keep!up!with!produc:on!– Diversity!in!Customers!and!Markets!
– Maintenance!of!quality!premium!
– Reliability!in!transporta:on!and!loss!control!– Long!term!infrastructure!op:miza:on!
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Crude*Demander’s/Refiner’s*Key*Focus*
• Demanders/Refiners*Seek:*– Access!to!logical!supplies;!delivered!price!adjusted!for!quality!(sulfur!and!yield)!and!risk!
– Alterna:ves!and!op:onality!– Reliability!in!transporta:on!and!quality!– Scale!and!simplicity!in!logis:cs!
– Safety!stock;!slack!in!the!system!
Driving*the*Crude*by*Rail*Development*
• Speed!to!Market!
• Railroad!Commitment!
• Cost!• Access!new!Markets;!East!and!West!
• Op:onality!and!Diversity!• Quality!Control!
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Threats*to*Crude*by*Rail*
• Reliability!• Pipelines!and!refineries!• Railcar!supply!:ming!
– Early!shortage!but!catching!up;!8,000!in!2011,!16,000!in!2012!and!31,000!in!2013!(1.5!mmbls/day)!
• Railroad!commitment,!route!conges:on!
• Scale!and!simplicity!
• Producer!and!refiner!fundamentals!
– Crude!flat!price!– Offshore!compe::on;!closing!arbs!
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Opportuni5es*for*Crude*by*Rail*
• Energy!Security!and!Domes:c!Economics!
• Combina:on!with!pipelines,!barging!and!vessels!
• East!and!West!
• Export!crudes!• Free!trade!zones!for!Canadian!crudes!• Cracking!the!Canadian!Rockies!• Refiner!fundamentals!
– Cheap!exit!costs!– Example!of!Saudis!following!Indian!strategies!
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Compara5ve*Advantages*between*Crude*Oil*Pipelines*and*Rail!Costs!or!looking!at!it!like!an!asset!owner!!
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Capital/Fixed!
Costs!
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Opera:ng/
Variable!Costs!
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Market!Value!
Created!
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Rank!
New*P/L *New*Rail *Expand*P/L* *Expand*Rail*
!!High ! !!High ! !!!!!Very!Low! !!!!!Low!
!!Low ! !!Low !! !!!!!!Low ! ! !!!!!Low!
!
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!!High ! !!Very!High !!!!!High ! ! !!!!!High!
!
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!!4th !!!!!!!!!3rd! ! !!!!!1st ! ! !!!!!2nd !!
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Compara5ve*Advantages*between*Crude*Oil*
Pipeline*and*Rail*** * * * *Pipeline * * * * *Rail*
• Working!Capital/XPTN!Arb ! ! !B * ! ! ! !+*• Exit!Cost ! ! ! ! ! ! ! !BB ! ! ! ! !++*• Speed!to!Market/Permidng ! ! !BB ! ! ! ! !++*• Scale!of!Commitment! ! ! ! !BB * ! ! ! !++*• Market!Diversity!and!Op:onality! !B * ! ! ! !++*• Quality!and!Loss!Control ! ! ! !+ ! ! ! ! !++*• Cost!Infla:on ! ! ! ! ! ! !++ ! ! ! ! !B*• Scalability ! ! ! ! ! ! ! !B ! ! ! ! !++*• Dependability ! ! ! ! ! ! !++ ! ! ! ! !B*!
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Example!Economics;!ND!to!USGC!
(no:onal!costs)!
Single*Car *Hybred * *Unit*Train *Gather/UT * *Pipe*
Truck ! !3.00 ! !3.00 ! ! !3.00 ! !1.00!
Load ! !2.00 ! !1.75 ! ! !1.50 ! !1.25!
Rail ! !8.00 ! !7.00 ! ! !6.00 ! !6.00!
FS* ! !0.50 ! !0.50 ! ! !0.50 ! !0.50!
Off ! !2.00 ! !1.75 ! ! !1.50 ! !1.50!
Car ! !1.00 ! !1.00 ! ! !0.50 ! !0.50!
Other! !0.50 ! !0.50 ! ! !0.25 ! !0.25!
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Total * *17.00 * *15.50 * * *13.75 * *11.50 * *12.50*
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Example!Clearing!Model!using!Pipe!and!Vessel!
Long!Run!Bakken!($1.00!gather)!(vs!WTI)!
H6.50!
H2.00!
+11.00!
0!
H2.00!
+13.00!
+6.00!
+9.00!
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Some!Thoughts!
• Rail!has!served!the!Bakken!well!as!a!short!and!mid!term!solu:on!
• Rail!unit!train!loading!and!receiving!capaci:es!for!Bakken,!and!rail!car!
capacity!will!be!more!than!adequate!in!the!long!term!
• Long!haul!rail!and!rail/barge/vessel!combina:on!economics!can!be!
compe::ve!with!pipelines!(it!is!up!to!the!Railroads)!
• Rail!advantages!can!outweigh!rail!risks!
• Will!Bakken!produc:on!con:nue!to!surprise!to!the!upside?!
• Will!pipeline!projects!con:nue!to!be!delayed?!
• With*a*Bakken*unit*train*capacity*overhang*and*capital*costs*sunk,*future*pipeline*expansion*and*new*build*projects*will*compete*against*unit*train*incremental*economics!*
• Will*Railroads*con5nue*to*value*the*oil*business?*• In*future*oil*expansions*will*first*mover*rail*solu5ons*have*long*
term*compe55ve/strategic*advantages?*
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BOE:**February*2013*Crude*Oil*Unit*Train*Loading*Facility*(Dickinson,*North*Dakota)*• Served!by!the!BN!(Mandan/Glendive!leg)!with!two!mainline!
switches!
• Two!sets!of!sideHbyHside!loop!tracks!and!a!perimeter!track;!
more!than!45,000!feet!of!track!(750!cars)!
• 24!rail!car!loading!sta:ons;!ability!to!load!2!trains!simultaneously;!16,000!bbls/hour!
• 350!acres!with!op:on!to!expand!another!450!acres!• Pipeline!connec:on!to!Belle!Fourche/Four!Bears!System!
• 14!truck!sta:ons!and!2!transload!sta:ons!with!access!to!highways!ND!10!and!US!94!
• 2!x!90mb,!1!x!32mb,!4!x!105mb!(2!x!105mb!es:mated!May!
2013)!and!16!x!500!bbl!storage!tanks;!640mb!in!total!
• 4!Crews;!24!hours/day!opera:on!
Bakken*Oil*Express*Rail*Hub!Dickinson,!North!Dakota!
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Bakken!Oil!Express!Rail!Hub!
BOE!
Steve*Magness*
405B535B6077*
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