Railway may eventually carry 45.5 mln barrels per year

Canadian Pacific Railway Ltd expects demand to ship oil by rail from the prolific Bakken field to continue to rise, with most of the crude destined for Gulf of Mexico refineries, the railway's executives said on Tuesday.

The company, whose lines run through the Bakken field in North Dakota and southern Saskatchewan, says crude-by-rail demand is now at about 13,000 carloads per year, or 8.5 million barrels. In June, CP said demand, on an annualized basis, was about 8,000 carloads, or 5.2 million barrels.

Fred Green, chief executive of Canada's No. 2 railway, said in an interview the line could eventually ship 70,000 carloads, or 45.5 million barrels, annually from Bakken.

"We think that's probably a little conservative, but that's where we'll stick for now," Green said.

Production from the multibillion-barrel Bakken field is rising rapidly as producers tap the once uneconomic reserves using horizontal drilling and fracturing techniques. In North Dakota alone, production in August rose to 440,000 barrels, up 19,000 from the prior month, according to state data.

Because of its rapid growth, the region is underserved by pipelines and producers have relied on railways to ship their crude to market. Shipping by rail also gives producers the flexibility to send their crude to refineries on the Gulf of Mexico and avoid the U.S. Midwest, where oil prices are $20 a barrel or more under what Gulf refiners will pay.

Canadian Pacific now ships the oil in 80-unit trains, with about 80 percent of shipments headed for Gulf of Mexico refineries. However new investments, part of a C$90 million ($88 million) capital plan for its lines in the region, will let it increase the size of trains to 100 tank cars, Green said.

Source: Reuters

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