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Tuesday, September 11, 2012

Back-Haul of Diluent on CBR Cars to Mix With Heavy Oil: Question?

Updates

September 12, 2012: wow, some folks are good at finding things and reading quickly. "Anon 1" found this bit of information regarding a new public-private project at the Port of Beaumont, paid for in part by Hurricane Ike funds, see comments. The description of the project is on page 5. As part of the project:
The Company anticipates that the Project will provide shippers, traders and refineries theopportunity to transport diesel fuel received by truck and barge for shipment by unit trains headed north, thereby creating a demand for emptied rail cars headed north. Diesel is used to provide power to drilling operations at the exporting oil fields. Likewise, crude oil from Canada is very heavy and does not flow through the pipeline without first being diluted. Diluents, which are essentially raw naphtha and comprise about 30% of the crude barrel assay, can be transloaded from truck or barge to the unit trains and delivered to the producers in the Canadian oil fields. Management does note that pipelines are one-directional, north to south, and do not present competition to rail for this part of the Business Plan. This comes from a pdf file, and this might be the link but if it doesn't work, google beaumont trainload; the pdf link will be near the top.

Later, 9:20 pm: I haven't seen a specific answer to "anon 1's" question on whether Bakken CBR trains are returning with diluent, but it certainly sounds like it is very likely. 

Later, 9:20 pm: here's a long press release; posted July 9, 2012; buried in the press release is this one-liner:
In addition, Southern Pacific has the opportunity to utilize its empty rail cars to transport lower priced diluent from the Gulf Coast on their return to Canada.
And another press release here:
Rail shipment requires about 33% less process diluent than what is necessary to meet pipeline specifications, Southern Pacific said. And return-trip rail cars can supply the project with low-cost Gulf Coast diluent. 
Later, 6:30 pm: comments are starting to come in. Here is one. And then there is one below in the comments.

I'm in a hurry; can't comment much, but I remember the comment that said "railroads were the method of last resort for shipping oil." Isn't this an interesting turn of events; whether you ship oil south and then bring diluent north, or bring diluent north and then ship oil south, the results are the same. This is very, very interesting. I love capitalism; no central planning on this one.

Original Post

"anon 1" posted this as a comment, but in case folks don't read the comments:

Comment at Peters: http://extras.newswire.ca/peters20120911/

Crude-by-rail cars return with condensate - free backhaul for diluent to mix with heavy oil.
That is important. A very big deal.

Does anyone know: How much is happening? Is Bakken CBR involved?

10 comments:

  1. The tar sands oil from Canada has such high viscosity that it makes it very hard to transport through pipelines, especially in the winter with cold temperatures. It would be like pumping toothpaste or worse.

    So what that oil it needs some type of light diluent (butane, pentane, that kind of compound) to bring the viscosity down and make it pump like "normal" crude. Canada doesn't have a lot of sources of diluent for the volumes, so the diluenet received from Canada needs to be returned to Canada.

    Canadian Pacific especially would benefit with this plan. Also, diluent return would make rates cheaper for Bakken to the Gulf Coast, but not to the east or west coasts (although with Marcellus, there is getting to be more diluent type material available on the east coast.)

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  2. so do you suppose more diluent will come from the Niobrara /wattenburg field. As this formation has a lot of NGL's .

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    Replies
    1. I have no idea; this is all new to me; first time I had heard of it; great "pick-up" by "anon 1."

      I find it incredible; Canada oil sands needs diluent and all of a sudden all these empty tank cars heading north. Quite a story.

      Delete
  3. The comment was oral, if I recall correctly in the discussion group including Legacy and Surge. Included in their audio.

    It makes sense. "free" probably overstates, but cheap makes sense until demand fills the cars. Then the RT cost can be spread to both directions.

    MDW linked to a discussion of condensate being piped from the gulf to Canada as diluent. Rail might free up that pipe for reversal.

    This may improve the economics of heavy crude and light crude.

    Probably lots of side effects.


    Yes, wet Marcellus and Wet Utica will have huge output. Trains from Ohio to Alberta to ... To ... to Ohio? Gives refineries near condensate an edge?

    PXP expects an LLS discount for condensate. Too much of it. But this moves it out.


    Anon 1

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  4. Your link led me to Beaumont Transload, rail unloading. Back haul naphtha or diesel. Partly funded by Hurricane Ike. Interesting pages on Bakken CBR about page 66. More more on the business plan. Interesting.

    Anon 1

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  5. The Canadian oil sand material needs to recycle the diluent used back to Alberta, as Alberta doesn't have the diluent supply needed. The cost of "new" diluent really harms the economics of the oil sands and the refineries really don't want the diluent for their product line.

    There's been a need for a return recycle diluent pipeline (paralleling Keystone or Keystone XL), but if a hodge-podge set up of rail / pipeline reversals could be set up, the oil sand producers and the refiners may prefer that option just based on cost. There's also the potential that some of the British Columbia gas fields will yield a large amount of diluent later, so why build something permanent like a diluent pipeline that has limited life?

    Oil sand bitumen in a railcar vs pipeline doesn't need as much diluent, as the pumping cost of getting bitumen into a railcar and out of a railcar is non-consequential. It's possible to pump the oil sand material through pipelines, but the pipelines really would need to be electric or steam traced (which costs a fortune both in capital and in operating costs). Some diluent in a railcar is still important though to minimize unloading time (getting pumps primed) and limiting rail tanker cleanout cost.

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  6. Wonder if ONEOK Partners could be considering running a line from Conway, Kansas to Alberta, paralleling its NGL and Oil lines? An even bolder ONEOK option would be to build another downstream processing plant in North Dakota, but only separate the C5's and above, and send those C5's to Alberta with another pipeline (or railed the C5's initially). The Bentek projections show a need for at least 10 more nat gas processing plants in North Dakota, so having a central processing plant for the NGLs could make a lot of economic sense for ONEOK. The NGL line to Conway would still be used for ethane, propane, and butane, but not for C5's.

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  7. Updates to these fascinating comments are placed up in the body of the post, as well as at this post:

    http://www.milliondollarwayblog.com/2012/09/what-we-will-be-talking-about-wednesday.html

    ReplyDelete
  8. OCTOBER 2012 ISSUE OF EARTH MAGAZINE PUBLISHED BY AMERICAN GEOSCIENCES INSTITUTE OUT OF ALEXANDRIA VIRGINIA HAS EIGHT PAGE ARTICLE ENTITLED "THE BAKKEN BOOM AND THE NEW WILD WEST." POPULAR IMPRESSIONS BY A FRESH GEOLOGY GRADUATE WORKING AS A WELL SITE GEOLOGIST. PERSONAL IMPRESSIONS. NO IN DEPTH DISCUSSION OF GEOLOGY OR ENGINEERING.
    tbp BISMARCK, ND

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    Replies
    1. Thank you. I posted the link at a stand-alone post:

      http://www.milliondollarwayblog.com/2012/09/human-interest-story-first-impressions.html

      Delete

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