Costs:
- pipelines: billions of dollars
- CBR terminals: millions of dollars
- 20% on a $50 million investment
- payback in 5 years
- scalable
- flexible
- activist environmentalists apparently are rail buffs, apparently they love Burlington Northern, Canadian Pacific, and Union Pacific (these are the big winners)
- measured in months, not years (let's see, are we in our 8th year with regard to the Keystone XL?)
- exception: years in California due to permitting process
- initial production huge; tapers off quickly (hard on pipelines; perfect for scalable CBR)
- pad drilling: huge initial production (can't get pipelines in fast enough for all the new pads)
- new rigs more effective; increased production volatility; again, CBR better than pipelines
- as sweet spots targeted, production volatility increases
So the pipeline model and the shale crude model are not compatible unless you have a third transport option to take up the slack. That is where rail came into play. Originally as a band-aid to ship production until pipelines were built. Now that the rail network is set up however, the band-aid becomes part of the solution and no longer just a work around.MDW summary:
- not one downside to CBR for shale oil production
- scalable, flexible
- no losers
- activist environmentalists love rail
- once natural gas proves cost effective for locomotives, one more advantage
- best thing that ever happened: Keystone XL killed
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