Great Video, Great Story: Philadelphia Refinery Opens Rail Yard To Receive Bakken Oil; Will We See Another "Cushing" Hub?

BakkenShale is reporting:

Philadephia Energy Solutions has built a state-of-the-art crude by rail unloading facility that can handle up to three unit trains.

The company’s two refineries south of Philadelphia, Point Breeze and Girard Point, are the largest consumers of Bakken crude. Rail receipts of 160,000 barrels arrive on a daily basis.

At the link is the video.

A big "thank you" to a reader for sending me this link.

Reuters is also reporting:

Philadelphia Energy Solutions' 350,000 barrel-per-day Pennsylvania refinery is now processing a fifth of all oil produced in North Dakota's prolific Bakken shale oil formation and the plant could take more from there or other sources.

Just a year after the company bought the plant, rescuing it from the threat of a shutdown due to the high cost of imported crude, the refinery is sucking up 190,000 bpd of North Dakota Bakken crude, CEO Philip Rinaldi said on Wednesday.

About 160,000 bpd of that crude was arriving direct to the refinery on two unit trains a day while the other 30,000 bpd was coming by rail then barge, he said at an event in Philadelphia marking the opening of a rail offloading point at the refinery.

PES had previously said it expected to rail in 140,000 bpd of Bakken crude to the refinery. PES is a joint venture of Carlyle Group and Energy Transfer Partners.

 Flashback: May 17, 2013 -- they thought they were nuts --

When two executives of a Philadelphia-based petroleum midstream and processing company last year proposed developing a crude-by-rail terminal to deliver domestic light sweet crude oil to five area refineries clustered along the Delaware River, the response from some was less than encouraging.

"They said we were nuts," recalled Erik Johnson, vice president and general manager of Canopy Prospecting Inc. 

"Crude oil to U.S. East Coast refineries has typically been delivered by water-borne methods since the early 1900s," he explained. "Some people who are currently retired and had spent a career in refining thought that rail-borne crude deliveries was an antiquated idea and not viable." 

Lending credence to some refining veterans' lackluster response was a chain of recent events. The fortunes of the region's oil processing facilities had taken a downward turn. For starters, Sunoco had announced that it would close or sell its Marcus Hook and Philadelphia refineries. Subsequently, ConocoPhillips (now Phillips 66) announced plans to immediately idle its Trainer refinery and sell the asset as a terminal or refinery. 

Together, these refineries accounted for nearly 700,000 barrels per day of processing capacity – roughly one-half of the refining capacity in the Northeast. 

"It did not look like bidders were emerging for any of the refineries, and the area would be lucky to keep one of them open," Johnson recalled.

That article continues:

Bakken crude shipments to Philadelphia will originate at Enbridge's Berthold terminal, which abuts BNSF Railway's mainline railroad. Johnson was quick to point out the terminal will actually be accessible via four other railroads in addition to BNSF.

"Philadelphia is not a one-railroad town," he said. "We have competitive railroad access."

Philadelphia lies within the Conrail Shared Assets Operations service area, which provides shippers access to the region by way of the CSX and Norfolk Southern railroads, Johnson said. In addition, shipments on the Canadian Pacific and Canadian National railroads can be directed eastbound onto the Conrail system at Chicago.

Another Cushing?

Having access to an independent facility enables a producer to market its crude oil to multiple refineries for the best price, Johnson explained. Refiners wishing to run different crude slates will have options from various producers, he added. In fact, the Eddystone terminal will be equipped to handle light sweet crude oils from other plays beside the Bakken. Under Phase 1 of the project, the terminal will be equipped to accept "Bakken-esque" crudes with API gravities ranging from 35 to 45 and 0.2 percent or lower sulfur content.

As a result, fungible crudes that could be traded under this "Philly Light" spec include production from Eagle Ford, Niobara, Permian Basin and Canadian Light Synthetic Crude sources. Johnson likened the Eddystone terminal to a Swiss city known as a neutral venue where diplomats from around the world meet to broker deals on behalf of their respective governments.

However, he acknowledged that a component of the project's second phase could help the burgeoning facility become a smaller, East Coast version of a place well-known to energy industry dealmakers: the U.S. oil trading hub at Cushing, Okla.

After Eddystone adds segregated storage capacity in the second phase, it will also be able to accept non-fungible slates – that is, crude oils that cannot be substituted for one another. "We're able to create a kind of mini-Cushing here, eventually," said Johnson. "There's a lot that can be done. It all depends really on where the market will take us."