Best Link of the Day? -- Crude-by-Rail

A huge "thank you" to Don for sending me this link. This is an incredible link.

Link at Bloomberg: pipeline companies investing in rail terminals.

See also Mike Filloon's recent article. And also "winners and losers" for those who believe 2013 will be the "year of the pipeline."

North American energy companies are starting to invest more in railroad terminals than the railroads themselves.

A group of oil and gas pipeline operators led by Plains All American Pipeline LP (PAA) announced plans just in the past three months to spend about $1 billion on rail depot projects to help move more crude from inland fields to refineries on the coasts. Warren Buffett’s Burlington Northern Santa Fe LLC, the largest U.S. railroad, spent $400 million on terminals in 2012.

For the first time, energy companies that traditionally rented rail capacity are buying the assets because swelling output from Alberta’s oil sands and shale fields in North Dakota’s Bakken region and Eagle Ford in Texas has overwhelmed pipelines. Producers and refiners such as Devon Energy Corp. (DVN) and Irving Oil Corp. say they’ll turn even more to rail to get domestically pumped crude to the highest-paying refineries.

“If a refiner in Philadelphia is paying $110 for Nigerian crude and could replace it with cheap Bakken crude, they’ll be willing to pay up to $109.99 to replace that,” said Bradley Olsen, an analyst with Tudor Pickering Holt & Co. in Houston. 

But go to the link. There is so much more there.

Look at the spot price for Canadian oil sands: $60! A $40 discount from WTI. We've talked about the problems Canadian producers are having. If Canadian producers are willing to keep investing despite discounts of $40/bbl, it can only mean good news for the Bakken, as the Bakken/WTI spread is likely to narrow. 

Wow, there are so many story lines there. Maybe I will post more on this story, maybe not.