Statoil plans to boost its North American production from less than 100,000 boe/d in 2011 to more than 500,000 boe/d in 2020. In the Bakken and Three Forks shale plays of North Dakota, the company said it will get its oil to market through greatly expanded use of rail transport beginning in September.
Using rail transport, the company can reach customers on the U.S. East, West and Gulf Coasts, and Canada.
“The value of our Bakken crude is lowered by present limited pipeline capacity in the region,” said Tor Martin Anfinnsen, senior vice president of crude, liquids and products in Statoil. “Transporting the crude by rail bypasses the pipeline bottlenecks and ensures our products get to market and that we get the highest possible price.”
A key to Statoil’s production growth in the Bakken Three Forks is its 2011 acquisition of Brigham Exploration Co. (see Shale Daily, Oct. 18, 2011), the company said.
The magnitude of Statoil’s Bakken/Three Forks operations is best illustrated by the fleets of trains that will be transporting crude. From now and onwards, the logistic chain will be upscaled with unit trains totaling more than 1,000 cars, Statoil said. A unit train is one in which all the cars are shipped from the same point of origin to the same destination without being split up or stored en route, saving time and money. The tank cars are on long-term lease.
Rail transit times to Canada, the U.S. East Coast and Gulf of Mexico are 14-15 days round trip, including loading and unloading.
“The rail solution supporting the Bakken business will increase the value of the oil significantly. This translates to substantial profits as production continues to grow,” said Torstein Hole, Statoil senior vice president U.S. onshore.
Given regional pipeline constraints, Bakken producers have increasingly been turning to rail solutions to move their production out of the play (see Shale Daily, Aug. 30). Railroads are benefitting, and not just in the Bakken.
“We see a significant growth opportunity in crude oil franchise from both Bakken and the Canadian oilfields. It’s just beginning to ramp up. So it’s early in the first inning with respect to that market,” Norfolk Southern’s Donald Seale, chief marketing officer, told financial analysts during a recent second quarter earnings conference call. “I will make a comparison for that market to the Marcellus Shale. Our Marcellus Shale input business was up 36% in the second quarter after being up over 50% in the first quarter.
“So the Utica Shale business adjacent and under Marcellus, as you know, will be the next tranche. And we do see a lot of leverage and opportunities with distribution facilities that have gone in that is supporting Marcellus when Utica ramps up…[T]ank car rental charges have gone up significantly, and they are short. But as you know, a lot of tank cars being built in Mexico add to the fleet. So as this business continues to build, we’ll see the tank car supply match up pretty quickly.”
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